A

AAPR
This is the ‘true’ rate of interest. Sometimes known as the mortgage comparison rate.
It takes into account all ‘up front’ fees and monthly charges, as well as the compounding frequency,
(i.e. how often the lender charges interest to your account).

ABA
Australian Bankers’ Association

ACCEPTANCE
When one party agrees to the price and terms of an offer by another party. Offer and acceptance create a contract.

ACCESSING ACCOUNTS
The different ways in which you can get to your funds e.g. Over the counter, ATM, EFTPOS.

ACCRUED INTEREST
Interest that you have incurred or earned that is yet to be charged or paid. Either you owe it or they owe it to you.

ACH PROCESSING (ACH - Automated Clearing House)
Processing that occurs between a nationwide network of financial institutions that send electronic messages, via
telecommunications lines instead of paper (cheques), to transfer money between two parties.
The most common ACH transactions are direct deposit, pre-authorized debits and corporate to corporate payments.

ACKNOWLEDGEMENT
To acknowledge the existence of a contract, term, deed or some other matter.

ACQUISITION COSTS
Additional costs of acquiring property e.g. fees, title insurance, lenders fees, etc.

ADDITIONAL REPAYMENTS
Extra payments made over and above the minimum required payments on the loan.
They will help to reduce the ‘interest cost’ and reduce the term of the loan.

ADJUSTMENTS
The allocation of expenses (council, government, rates, etc ) on settlement day that the seller of the property has paid for but not used. The buyer is charged for these adjustments.

AFFORDABILITY
In Australia, housing affordability is measured by an index (the housing affordability index).
This compares the ‘average household disposable income’ to the income required to meet the repayments for the loan.
The higher the ratio, the more affordable is the property to be purchased. Lenders use this ratio to assist in evaluating a
borrower’s ability to repay a loan.

AGENCY
Any relationship in which one party (agent) acts for or represents another (principal) under the authority of the latter.
Agency involving real property should be in writing, such as listings, trusts, power-of-attorney, etc.

AGENT
One who is authorized to act for, or represent, another (principal). Authority may be expressed (usually in writing) or implied (not in writing but through the implied actions of both parties).

AGREEMENT OF SALE
An agreement between the buyer and seller of real property stating the price and terms of the sale.

ALL – IN – ONE LOAN
Sometimes referred to as a ‘Line of Credit’. Allows a borrower to deposit all of their income into their loan account and withdraw money for daily expenses. If used properly this can help to reduce the interest costs and to pay off the loan quickly.

AMENDMENT
A change, either to correct an error or to alter a part of an agreement, without changing the principal idea or essence.

AMORTIZE
To reduce a debt by regular payments of both principal and interest, as opposed to interest only payments.

AMORTIZATION SCHEDULE
A schedule of payments designed to liquidate a debt. May be over any agreed upon period of time. An example of this would be a standard 25 year mortgage amortization wherein a borrower would make 300 equal consecutive monthly payments at the end of which the original loan would be paid in full.

AMORTIZATION TERM
The agreed upon number of months or years a borrower will be making payments to liquidate (pay off) a loan, e.g. 25 years.

ANGELS
Private individuals with capital to invest in business enterprises.

ANNUAL PERCENTAGE RATE (APR)
The Annual Percentage Rate is the percentage the borrower will pay the lender on an annual basis. A fixed rate loan will have an annual percentage rate that is set and will not fluctuate from year to year. A variable rate or adjustable rate mortgage loan will have an interest rate that varies and changes with the prime rate set by the country’s Central (Reserve or Federal) Bank.

APPRAISED VALUE
The value assigned to a property by a licensed professional (appraiser) to assess its fair market value.

APPRECIATION
An increase in value of property due to either an improvement of the area or improvements to the property .

ARREARS
Payments (expenses) that are due but have not yet been paid.

“AS IS” CONDITION
Premises accepted by a buyer in the condition existing at the time of sale, including all physical defects.

ASSESSED VALUE
Value placed on property for property-tax purposes by the tax assessor.

ASSETS
Things that you own which have value in financial terms.

ASSIGNMENT
A transfer of title to another of any property, real or personal, or of any rights or estates in the property. Common assignments are of leases, mortgages, deeds of trust or notes, but the general term encompasses all transfers of title.

ASSUMPTION OF A LOAN
When one individual assumes the responsibilities of a loan from another individual it is called ‘Assumption of the Loan’. Lenders require both parties to get written authorization in advance of any such transaction for it to be legally binding.

ASSUMPTION OF MORTGAGE
Agreement by a buyer to assume the liability under an existing document secured by a mortgage or deed of trust. The lender usually must approve the new debtor in order to release the existing debtor (usually the seller) from liability.

AT CALL
A savings, investment or deposit account from which the customer can withdraw money immediately.

AUCTION
The public sale of property with the property going to the highest bidder.
AUTOMATED BANKING MACHINE (ABM)
Terminals that allow customers to perform many everyday banking tasks, e.g., deposits, withdrawals, bill payments and transfers between accounts.

AUTOMATED TELLER MACHINE (ATM)
A machine that allows the customer to perform some of the more common teller transactions, such as cash withdrawals, deposits, and transfers. ATMs are generally accessible 24 hours a day, 7 days a week.
 

B

BAD
Bank Account Debit tax which States and Territories in Australia impose on withdrawals from cheque accounts.

BAD DEBT
A debt with little likelihood of being repaid and which is written off as a loss.

BALANCE
The amount of money in your account.

BALANCE OUTSTANDING
The amount owing in your account on any particular day.

BALLOON NOTE
A note demanding periodic payments which are insufficient to fully amortize the face amount of the note prior to maturity, so that a principal sum known as a “balloon” is due at maturity. i.e. the periodic payments will not be enough to pay the full debt so that the balance owing at the end is called the ‘balloon’ payment.

BALLOON PAYMENT
A borrower may obtain a loan with minimal up front costs and monthly payments and then agree to pay a lump sum or Balloon Payment at the end of the loan agreement. Many customers will refinance the balance of their balloon payment loan into a longer-term loan to avoid paying the lump sum all at once.

BASIS POINT
A finance term meaning a yield of 1/100th of 1% annually i.e. 0.01 % (see Yield).

BANK FOR INTERNATIONAL SETTLEMENTS (BIS)
The BIS, located in Basle, Switzerland, was established in 1930 to administer the post-World War I reparations agreements.
Since the 1960s, the BIS has evolved into an important international monetary institution, and has provided a forum in which central bankers meet and consult on a monthly basis. As an independent financial organization, the BIS performs a variety of banking, trustee, and agent functions, primarily with central banks.

BANKING ACT
Legislation within countries governing how banks operate.

BANK CARD
A card issued by a financial institution that identifies the holder as a customer of the institution and allows access to accounts through an ATM; also a credit or debit card issued by a financial institution.

BANK CHEQUE
A cheque drawn on the bank whereby the bank will pay the proceeds of that cheque to the ‘payee’ (person or business to whom the cheque is made payable). If you ‘bought’ the bank cheque to present to a 3rd party the funds would have been taken from your account at the time that you bought the ‘bank cheque’.

BANK RATE
The interest rate paid by major financial institutions if they borrow from the Central Bank (Government Bank) of a country.
The Bank Rate influences the rates of interest major financial institutions charge and pay their customers.

BANKRUPTCY
A debtor that is judged legally insolvent and whose remaining property is then administered for the creditors or is distributed among them. The bankrupt’s assets are distributed by the court to the creditors as full satisfaction of the debts in accordance with certain priorities and exemptions. Voluntary bankruptcy is petitioned for by the debtor. Involuntary bankruptcy is petitioned for by the creditors.

BASIC VARIABLE
A variable home loan at a reduced rate, but with less features than the standard variable loan.

BEARER
A person presenting a cheque to a bank.


BLANK CHEQUE
A cheque that does not have a dollar amount written on it but does have a valid signature.

BODY CORPORATE
A corporation consisting of the owners of units within a strata building block. They elect an executive committee for the
management of the building and common areas.

BONDS
Offered by governments and corporations, bonds are investments in which you lend a sum of money to the issuer for a set amount of time at a fixed rate of interest. You receive a certificate from the issuer of the bond.

BREAK COSTS
Penalties charged by the lender when a loan is paid out early.

BROKER
The Broker is the person that is responsible for arranging a loan agreement between the borrower and the bank or lender.
The Broker is a licensed professional and should present the best loan programs to the borrower. The broker must assure that all the documentation, lender guidelines, and relevant laws are adhered to.

BUILDING INSPECTIONS
An inspection usually carried out on a building by a qualified building inspector and prior to the purchase.

BUILDING REGULATIONS
Standards set by appropriate government bodies or local councils to control the quality of buildings and renovations within their area.

BUSINESS DEVELOPMENT BANK
A government corporation that helps establish and develop businesses, especially small and medium-sized ones. They provide financial and management services similar to those found in the banking industry.


C

CAP
A CAP restricts the amount the lender may increase the interest rate in a given year.
The CAP protects the borrower from fluctuations in the prime interest rate.

CAPITAL ADEQUACY RATIO
The ratio of total capital divided by risk-weighted assets and risk-weighted off-balance sheet items. A bank is expected to meet a minimum capital ratio of a certain % unless a higher ratio has been specifically prescribed by the Government Authority in charge of financial institutions.

CAPITAL
The value of all your long term assets such as house, properties, investments etc.

CAPITALISED INTEREST
Interest that is payable but instead is added to the debt (or savings) rather than paid currently.
 

CAPITAL GAIN or LOSS
The difference between the price you paid for an investment and the price at which you sell (in other words, the profit or loss made or suffered). Investments that earn capital gains or losses include property, equity and growth funds.

CAVEAT
Is the latin word for ‘beware’. Normally a clause in the contract stipulating a particular requirement.

CAVEAT EMPTOR
Is the latin word for ‘let the buyer beware’. The buyer takes the risk.

CERTIFICATE of DEPOSIT (CD)
A type of deposit account typically with a fixed minimum term and a minimum initial deposit. Interest payments may be either fixed or variable. Generally, CDs offer a higher interest rate than other deposit accounts.

CERTIFICATE of TITLE
The Certificate of Title establishes rightful ownership of a home, development or property. This document is drawn up by an attorney, is legally binding and is kept in the public records for any citizen to see.

CHEQUE
A written order for payment of a certain amount of money.

CHEQUE BOOK
A book with blank cheques. The cheques may be personalized or non-personalized.

CHEQUE REGISTER
A book with space for you to note the details of every transaction in your chequing account.

CHEQUE SAFEKEEPING
The process of electronically storing customers' paid cheques. The electronic storage is the official record of the transaction and is retained by the financial institution. Canceled cheques are stored rather than being returned to the customer.

CHATTELS
Real chattels are buildings and fittings attached to the building.
Personal chattels are personal property such as clothing and furniture.

CLAIM
An assertion of some right or demand.

CLEARING and SETTLEMENT
The process whereby banks collect or pay out for items drawn on or paid into accounts in their institution.
This process enables banks to accept each others’ cheques and bank drafts.

CLOSING
The time at which all loan documents have been signed and a period, wherein the borrower has the right to rescind, has passed.
A loan has ‘closed’ when funds are disbursed to the appropriate parties and a lien against the security has been placed by the creditor for the amount of the "closed" loan.

CO – BRANDED CARD
An alliance between a card issuer and a large non-deposit taking corporation which offers discounts/rewards to cardholders for using the card which bears the corporation's name.

COLLATERAL
Property (real, personal or otherwise) pledged as security for a loan. Also, any supplementary promise of payment, such as
a guarantee. Cash is preferred as collateral by the lending institutions but banks and lenders may allow you to use a home or other material item(s) as collateral when securing a loan.

COMMERCIAL BANKING
Commercial banking specifically relates to small and medium-sized businesses.

COMMERCIAL BANK
An institution for savings, loans, checking accounts and other services not all of which are found at savings and loan institutions.

COMMISSION
An amount, usually a percentage, paid to an agent as compensation for his services.
The amount to a real estate agent is generally a percentage of the sale price.

COMMON PROPERTY
Area used and owned by more than one person. The garden area within an apartment block is common property to the owners of the apartments.

COMPANY TITLE
A special property title that applies to an apartment block where all of the residents have formed a company to own the units. The individual ‘owners’ must seek approval to sell their unit, as they own shares in the company, not in the actual unit.


COMPARABLE SALE
Sales of properties which have similar characteristics to the subject property and are used in the appraisal process to determine the value of the subject property.

COMPOUNDING
Refers to earning income on your income. For example, on fixed income investments that pay interest over time at periodic intervals, compounding means making interest on your initial investment and also on the interest as it builds up (i.e., earning interest on your interest).

COMPOUND INTEREST
Interest that accrues when earnings for a specific period are added to principal. Thus interest for the following period is computed on the principal plus interest owing. This also applies to your loans and credit cards.

CONDITIONAL COMMITMENT
A loan commitment given before a borrower (buyer) is obtained and subject to approval of the buyer by the lender.

CONDOMINIUM
A structure of two or more units, the interior space of which are individually owned. The balance of the property (both land and building) is owned in common by the owners of the individual units. The size of each unit is measured from the interior surfaces (exclusive of paint or other finishes) of the exterior walls, floors and ceiling. The remainder of the property is called the common area. ( same as for strata title ).

CONSUMER PRICE INDEX
An index that measures movements in the average price of products and services typically consumed by families within a country.

CONSUMER REPORTING AGENCY (CREDIT BUREAU)
Also known as a bureau, a Consumer Reporting Agency tracks payment history, account activity and other relevant public records for the purposes of determining the credit worthiness of individuals.

CONTINGENCY
Commonly, the dependence upon a stated event that must occur before a contract is binding. For example: the sale of a house, contingent upon the buyer obtaining financing.

CONTRACT
An agreement between two or more persons or entities that creates or modifies a legal relationship to do or not to do certain things. Generally based upon an offer by one party and the acceptance of that offer by the other party.

CONTRIBUTION
An amount of money you put into a savings/investment plan. May be ‘once only’ or at regular or irregular intervals.

CONVENTIONAL LOAN
A standard type of loan.

CONVEYANCE
Transfer of title to land. Includes most instruments by which an interest in real estate is created, mortgaged or assigned.

CORPORATE BANKING
Banking services for large firms.

CORRESPONDENT BANK
In a country where a bank does not have offices it may make arrangements with another bank to act as its agent in that country.
The correspondent bank provides services to the first bank's customers who are visiting or doing business in that country,
on behalf of the bank in the home country.

COST APPROACH
One of the methods used in the valuation process. The estimated value of a property is arrived at by estimating the replacement cost of the building, deducting for the estimated accrued depreciation, then adding the market value of the land.

COST BASIS
The cost basis is the original price paid for a home or property. The cost basis is needed when establishing the capital gains
or losses on a property (see capital gains). The capital gains are the profits made above and beyond the cost basis.
COVER NOTE
Temporary insurance before the implementation of a formal insurance policy.

CREDIT CARDS
Credit cards such as Visa and MasterCard allow the holder to charge purchases rather than pay cash. Generally, no interest is charged as long as the monthly statement is paid in full by the due date. If it is not paid in full interest rates are usually high.

CRAA
The Credit Reference Association of Australia which has all details relating to all borrowers’ credit history.

CREDIT HISTORY
A history of an individual’s ability to pay their bills on time as well as any other relevant public records.

CREDIT LIMIT
The maximum limit that a borrower may have on their account.

CREDIT REPORT ( CRA )
A report outlining an individual’s credit history, public records and credit worthiness.

CREDIT RISK
The risk of loss assumed under a financial contract whereby borrowers or counter- parties to a loan or other credit-related contract may default or fail to perform their obligations.

CROSSED CHEQUE
A cheque that has two parallel vertical lines drawn on it signifies that the cheque must be paid into the bank account of the person or business to which it is made payable unless that person or business signs it over to another party.


D
DAILY INTEREST
Interest is calculated on a daily basis on the outstanding balance at the end of each day.

DEBIT
A debit increases the amount you owe or it reduces the amount you have in your account.

DEBIT CARD
Another name for a bank card. It allows you to access your deposit accounts electronically. You can only draw on money already in your account. Use it at banking machines or to pay for purchases at retailers using the direct payment service.

DEBT
The money you owe.

DEBT/EQUITY RATIO
A comparison of debt and equity used to measure the health of a business. Debt compared to equity.

DEBT TO INCOME RATIO
Calculated by comparing the total debt to the total monthly income (after subtracting the total monthly payments).
Lending institutions will calculate a customer’s debt to income ratio when deciding whether to fund a home loan.

DEED
Actually, any one of many conveyancing or financing instruments, but generally a conveyancing instrument given to pass free title to the property upon sale.

DEED OF TRUST
An instrument that may be used in place of a mortgage. Property is transferred to a trustee by the borrower (trustor), in favor of the lender (beneficiary) and passed back to the borrower upon payment of the total debt.

DEFAULT
When a customer fails to meet the obligations set forth in a mortgage loan agreement the loan goes into default. The bank may choose to foreclose on the home and sell it if the loan obligations are not met or they may impose a higher rate of interest, depending on the conditions of the loan agreement.
DEFAULT RATE
The increased interest rate that is applied once a borrower has defaulted on payment(s). Usually an additional 4 %.

DEFERRED MAINTENANCE
Repairs necessary to put a property in good condition. An owner may have an account for such maintenance.

DEFLATION
An actual decline in the general level of prices in the economy.

DEMAND LOAN
A loan that must be repaid in full on demand.

DEPOSIT
Money given by the buyer with an offer to purchase. It shows good faith and may be called ‘earnest money’.

DEPRECIATION
Loss of value in any asset brought about by age, physical deterioration or functional or economic obsolescence.

DIRECT DEBIT
A means of authorizing recurring payments (e.g., mortgage payments, insurance premiums) to be drawn on an account.

DIRECT DEPOSIT/DIRECT FUND TRANSFERS
A means of authorizing payment made by governments or companies to be deposited directly into a recipient's bank account.
It is used mainly for deposits of a recurring nature such as salary, pensions and interest payments.

DISBURSEMENTS
Payments made during the course of an escrow (see escrow) or at closing. Paying money out to another party.

DISCHARGE FEE
See Mortgage Discharge Fee.

DIVIDENDS
Company earnings that may be paid out to shareholders according to the number of shares or stocks they hold.

DOCUMENTARY CREDIT
Written undertaking by a bank on behalf of an importer authorizing an exporter to draw drafts (money) on the bank up to a specified amount under specific terms and conditions. They are used to facilitate international trade. In some countries these instruments are called commercial letters of credit.

DOMESTIC BANKS
Banks owned by the locals within a country.

DRAWDOWN
Accessing available approved funds where a limit has been set and you can access as required.

E
EARLY TERMINATION CHARGES
Fees and charges that may be applied when you pay out your loan early.

EASEMENT
The right to use a corridor of land which is owned by someone else.

EFT/POS
Electronic funds transfer (EFT) at the point of sale (POS). A payment option which allows consumers to pay for purchases by transferring funds directly from their accounts to a merchant's account.

ELECTRONIC FUNDS TRANSFER (EFT)
A system that transfers funds electronically instead of by traditional means such as cash or cheques.

ENDORSE
To sign the back of a cheque in order to transfer its ownership to someone else. You transfer payment to someone else.

EQUITY
The Equity you have in your home is the amount of money your home is worth minus the amount you owe.

EQUITY MORTGAGE
A loan that is secured by the value or part value of an asset, usually a house or property.

EQUITY LOAN
A home equity loan allows you to gain access to your home equity without having to sell the home.
The thing about a home equity loan is you can get cash against the equity in your home.

ESCROW
Money placed in an Escrow account is money that is secured for payment on taxes, insurance and other agreed upon payments.

ESTABLISHMENT FEES
Fees which may be charged to set up a loan.

EXCHANGE OF CONTRACT
When the vendor and the purchaser swap documents with a view to settlement.

F
FAIR MARKET VALUE
The price that would be negotiated by a willing buyer and a willing seller in a reasonable time.

FID
Financial Institutions Duty applied to the receipts of financial institutions in certain states in Australia.

FINANCING COSTS
The cost of interest and other charges involved in borrowing money to build or purchase real estate.

FIRE INSURANCE
Insurance against loss or damage by fire which may also include other coverage.

FIRST MORTGAGE
A mortgage having priority over all other voluntary liens (claims) on a specific property.

FIXED-RETURN INSTRUMENTS or VEHICLES
Instruments that pay a fixed rate of interest for an agreed-upon length of time such as term deposits, Treasury bills and
Guaranteed Investment Certificates.

FIXED RATE MORTGAGE
A mortgage having a rate of interest which remains the same for the term of the mortgage.

FORECLOSURE
A proceeding in or out of court, to extinguish all rights, title, and interest of the owner(s), in order to sell the property to satisfy a lien (claim) against it.

FOREIGN CURRENCY
Paper money and coins from other countries.

FOREIGN EXCHANGE RATE
The value of a nation’s currency in terms of another nation’s currency.

FREEHOLD
The dwelling and the land is owned, without debt, by the owner.

FRONTAGE
The measurement along the front of a parcel of land that is the portion facing a street, waterway, walkway, etc. that would be considered the most valuable measurement of the property.

FROZEN ACCOUNT
An account where all transactions have been suspended and the balance remains the same. Monies cannot be withdrawn.
FULLY AMORTIZED LOAN
A loan of equal, regular payments, which cause the principal and interest to be completely paid by the due date.


G
GARNISHEE
To legally, usually by court order, have someone’s wages or part thereof, property or money paid to someone else.

GAZUMPING
When your offer on a property has been accepted, but not paid for, and someone else offers a higher price which is accepted.

GEARING
The ratio of your own investment in a property to the amount borrowed for the property.
You are highly geared if you have a high proportion of borrowed funds to your own invested funds.

GOOD FAITH
Something done with good intentions without knowledge of fraudulent circumstances.

GOVERNMENT SAVINGS BONDS (GSB’s)
The bonds, which are a form of debt issued by governments, are cashable at any time at most financial institutions.

GROSS INCOME
Total income before any expenses or taxes are deducted.

GST
Goods and services tax. VAT in some countries.

GUARANTEE
A promise made by one party to ensure that certain actions and responsibilities are met.

GUARANTEED INVESTMENT CERTIFICATE
An investment in which you deposit money, over a fixed period of time and for which you are paid a set rate of interest.

GUARANTOR
A party who guarantees that the actions and responsibilities of another party will be met.


H

HIGHEST BID
This is the highest price offered at auction by a bidder.

HOLDING DEPOSIT
This is a refundable deposit given by the purchaser to go ahead with the purchase of the property.

HOME BANKING
A way to access bank accounts by phone. Typically customers can transfer funds, pay bills and make account inquiries.

HOME EQUITY LOAN
A housing loan that is secured by the equity (value) in your home.

I
I L R
Indicator Lending Rate. The base rate on which variable interest rate loans and overdrafts are set,
e.g. your lending rate may be 2% above the base rate ( I L R ). Usually quoted in the major daily newspapers.

INCLUSIONS
Items such as light fittings, curtains etc., that are included with the property in the sale.
INCOME APPROACH
An analysis used in valuations whereby value is estimated by using the estimated gross income from the subject property.

INCOME-SPLITTING
A financial strategy for tax purposes. Splitting income refers to the process of shifting income from the hands of one family member to another who is in a lower tax bracket and will therefore pay tax at a lower rate. This helps reduce your family’s overall tax burden.

I M F (INTERNATIONAL MONETARY FUND)
Set up to facilitate growth of world trade and to assist under-developed countries by providing loans to member countries.

IMPOUND ACCOUNT
An ‘impound account’ is created to set aside funds for paying insurance, taxes and other associated fees. The money required for the impound account is amortized into the cost of the borrower’s monthly mortgage loan payment.

INSTITUTIONAL LENDER
A bank or other business which makes loans to the public in the ordinary course of business.

INTER-BANK RATE
The interest rate at which major banks lend to each other.

INTEREST
The fee paid or earned for the use of money.

INTEREST ONLY LOAN
A loan where ‘interest only’ is paid during the term of the loan. The principal amount borrowed is paid back at the end of the term.

INTEREST RATE
The percentage used to calculate the interest to be paid.

INTEREST RATE CAP
Example: a 7% loan with a 5% interest rate cap would have a maximum interest rate for the life of the loan which could not exceed 12%.

INTEREST RATE SWAP
These are transactions whereby ‘floating rate loans’ are converted into ‘fixed rate loans’ and vice versa to avoid the risk of interest rate rises or falls in the future.

INTERIM FINANCING
During the construction phase of a renovation or development of a building property, the owner or developer will use
interim financing. In many instances the bank or lender will allocate the funds as the construction progresses.
For example, the lender will fund the foundation and when the foundation is complete they will release additional funds for the purpose of framing, then roofing and so on. When the construction is finally finished the developer will typically sell the property or refinance through a mortgage loan.

INTERNATIONAL BANKING
The area of banking business that includes the operation of bank branches and subsidiaries located outside of the home country, the supervision of correspondent banking relationships, foreign exchange trading and trade finance.

INTERNATIONAL MONETARY FUND ( I M F )
Set up to facilitate growth of world trade and to assist under-developed countries by providing loans to member countries.

INTERNET BANKING
Where your banking transactions can be made via the internet.

INTRODUCTORY LOAN
A loan where the interest rate is offered at a lower rate for an initial period such as the first 12 months.

INVESTMENT LOAN
A loan taken out for the purchase of an investment property.

J
JOINT NOTE
A promise to pay, executed by two or more persons, each having equal liability.

JOINT TENANCY
Joint ownership by two or more persons with right of survivorship. i.e. if one party dies, their share passes to the surviving
party/parties.

JOINT VENTURE
This is where two or more businesses undertake a business venture or project.

JUDGEMENT
The final decision of a court of law. Money judgments, when recorded, become a lien (charge) on the real property of the defendant.

JUDGEMENT LIEN
An involuntary lien (charge) against the property of the debtor.

K
KRUGERRAND
A South African gold bullion coin.

L
LATE CHARGE
A penalty charged for failure to pay an installment payment on time.

LAND TAX
A government tax charged to the owners of a property ( usually an investment property ) valued above a certain dollar amount.

LAND TRANSFER FEE
A government tax assessed and charged on the selling price of a property.

LEASE
An agreement to rent for a period of time at an agreed price.

L I B O R
London Inter Bank Offered Rate : The cost of money in the London money market.

LIEN
A form of encumbrance which usually makes property security for the payment of a debt or discharge of an obligation.
Examples would include: judgements, taxes, mortgages, deeds of trust, etc.

LINE OF CREDIT
A loan agreement establishing the maximum amount of money a borrower may draw upon and at what time intervals.
The agreement also sets out other conditions such as how and when money is to be repaid.

LISTING
An agreement between an owner of real property and a real estate agent whereby the agent agrees to secure a buyer or tenant for specific property, at a certain price and terms, in return for a fee or commission.

LENDER
Any person or entity advancing funds, which are to be repaid.

LOAN APPLICATION
The form used to obtain the borrower’s information and define the terms of the loan for which they are applying.
It gives the name(s) of the borrower, place of employment, salary, bank accounts, credit references, assets, etc. It is the source of information on which the lender makes its’ decision on whether or not to approve the loan.

LOAN ORIGINATION
The start of the loan process. Usually an application is taken and an initial quote is given. The borrower is asked to supply documents supporting the information that is included in the application and upon which the quote is based.

LOAN ORIGINATION FEE
A once only ‘up-front’ fee charged by the lender.

LOAN PACKAGE
The complete file of all items necessary for the lender to decide to approve or reject the loan.
These items would include the information on the prospective borrower (loan application, credit report, financial statement,
pay stubs, employment letters, etc.) and information on the property (appraisal, sales contract, survey, etc.).

LOAN SERVICING
The collection, bookkeeping and follow-up of a loan until it is fully paid.

LOCK
A commitment from a lender to guarantee an interest rate for a borrower for a period of time.
Rate locks expire after an agreed upon time.

L V R
Loan to Value Ratio is the same as LTV.

LOAN TO VALUE (L T V or L V R )
Loan to Value is the percentage of what is owed against the property versus the property’s fair market value.


M
MARGIN
The difference between the lender’s cost of interest and the interest rate that they charge the borrower.
e.g. their cost of funds is 5.0% and they lend at 7.5% ..… their margin is 2.5%.

MARKET DATA APPROACH
Appraising the value of a property by comparing the sales price of similar properties recently sold in the area.
The degree of similarity of the properties, distance from the subject property and terms of the sale are important considerations.

MARKET PRICE
The price a property brings in a given market regardless of pressures, motives or intelligence.

MARKET VALUE
The highest price that a buyer would pay and a seller accept, both being fully informed and with the property exposed for a reasonable period of time on the open market.

MATURITY
The date by which the loan or investment amount should be repaid in full.

MINIMUM MONTHLY BALANCE
The least amount of money that has been in a bank account during the whole month.

MISREPRESENTATION
A statement or conduct by a person who represents to another a fact which is not true. Failure to disclose is also misrepresentation.

MONEY LAUNDERING
Popular term used to describe the process whereby criminals conceal illicitly acquired funds by converting them into seemingly legitimate income.

MONEY MARKETS
The part of the capital market where government Treasury bills, commercial paper, bankers' acceptances, and other short-term obligations are bought and sold.

MORTGAGE
A Mortgage is a lien (charge) against a home or property that secures the debt created by the home loan.

MORTGAGE INSURANCE
Lending institutions and banks will require you to carry mortgage insurance if you have not put down 20% or greater on your mortgage loan (check the laws in your state).

MORTGAGE BANKER
A company, not being a bank, that provides mortgage financing with its own funds. These funds are usually borrowed and the financing is either short term or if long term, the mortgages are sold to investors within a short time.

MORTGAGE BROKER
One who, for a fee, brings together a borrower and a lender and handles the necessary applications and paperwork for the borrower to obtain the loan against real property.

MORTGAGE COMPARISON RATE
Can also be known as the ‘true rate’. Used to compare rates between lending institutions. It should include the interest rate, all fees and how frequently the interest is charged (debited) to your account.

MORTGAGE DISCHARGE FEE
A fee charged by the lender to cover costs involved in completing the loan (i.e. paying out the loan).

MORTGAGEE
The party lending the money and receiving the mortgage.

MORTGAGE INSURANCE
Insurance written to protect the mortgage lender against loss due to default, thus enabling the lender to lend a higher percentage of the sales price. The borrower pays the cost of the mortgage insurance.

MORTGAGOR
The party who borrows the money and gives the mortgage.


N
NEGATIVE AMORTIZATION
A loan in which the interest rate and payment may change independently from each other, creating the potential for the principal balance of the loan to increase rather than decrease over the term of the loan (e.g. the interest rate rises but repayments remain the same but are not high enough to pay the interest on the loan so that the principal owing actually increases).

NEGATIVE GEARING
Where the rental from an investment property is less than the ‘interest cost’ of the loan.
The ‘deficiency’ may be offset against taxable income to reduce your tax ‘bill’.

NET WORTH
Net worth is the difference between an individual’s assets and liabilities. Net worth takes into consideration all assets and
liabilities, liquid or not and can be a positive or negative number.

N.S.F.
N.S.F. means Not Sufficient Funds. If a cheque is returned for this reason it means that there was not enough money in
your bank account to cover the amount of the cheque. There is a fee to you if this situation occurs.

O
OFFER
A proposal by one party to another party. To be legally binding, an offer must be specific as to price and terms.

OFFER AND ACCEPTANCE
Necessary elements to form a legal contract.

OFF THE PLAN
The purchase of a property before it has been completed i.e. after having seen only the plans.

OFFSET ACCOUNT
A ‘savings’ account run in conjunction with a ‘loan’ account. The interest earned on the savings account is ‘offset’
against the interest charged on the loan account.

ONLINE BANKING
Personal and business account information accessible through a personal computer and the Internet.
Allows you to pay bills and get account details via the internet.

OPTION TO BUY
A legally binding document which gives a person the right to purchase something, within a period of time in the future, for a specific price.

ORIGINAL COST
The purchase price of a property paid by the present owner.

ORIGINATION FEE
A lender’s fee charged to the borrower for handling and making a real estate loan. Usually a percentage of the loan amount.

OVERDRAFT
A ‘cheque’ account which allows a customer to write cheques to an agreed amount for funds that the customer does not have in the account.

OVER IMPROVEMENT
An improvement, excessive in cost, size or type in relation to land value or value of surrounding properties and for which one could not reasonably expect to recover the outlay in the foreseeable future.

OWNER OCCUPIED
Property physically occupied by the legal owner(s).

P
PERSONAL IDENTIFICATION NUMBER (PIN) or
PERSONAL ACCESS NUMBER (PAN)
A secret number or code used by the account holder to authorize a transaction or obtain information regarding his or her account. Often used in conjunction with a plastic card or with a telephone system.

PASSBOOK
A book in which all the transactions in a bank account are noted.
This book may list the transaction codes and the customer's responsibilities.

PASSED IN
When the ‘highest bid’ at auction has not reached the ‘reserve price’ set by the vendor.

PAYEE
The name of the person to whom the money in a cheque is to be paid.

PERSONALIZED CHEQUE
A cheque which has your name and account number printed on it.

PERSONAL DISPOSABLE INCOME
Personal income minus personal income tax payments. Also called “take-home pay.”

PERSONAL PROPERTY
Any property which is not designated by law as real property.
PERSONAL SAVINGS
The difference between personal disposable income and personal consumption spending. i.e. the amount left-over for savings.

PHONE BANKING
Banking transactions that may be made over the telephone.
POWER OF ATTORNEY
Power of Attorney is the authority of one person given to another individual for the purpose of acting in the afore-mentioned person’s behalf.

PRELIMINARY TITLE REPORT
A report showing the condition of title before a sale or loan transaction.
After completion of the transaction, a title policy is issued.

PREPAID EXPENSES
The money that is secured in an escrow account for the purpose of closing costs, documentation, inspections, credit approvals etc. These expenses are paid ‘in advance’. In some instances the prepaid expenses can be amortized into the life of the loan to keep the borrower’s up-front costs to a minimum.

PREPAYMENT
A payment that is made ‘in advance’.

PREPAYMENT CLAUSE
A loan contract will detail any Prepayment Clause for the pay-off of the loan. If you believe that you may someday pay off a
mortgage contract early , be sure to review the loan documents thoroughly to be sure there are not prepayment penalties. There are many loan programs that do not have a prepayment penalty clause.

PREPAYMENT PENALTY
A penalty specified under a note, mortgage or deed of trust and imposed when the loan
(or a percentage thereof) is paid before it is due. These are usually for a set period of time from loan inception
(i.e.: one year, three years, five years, etc.).

PRIME RATE / PRIME LENDING RATE
The rate of interest charged on loans by banks to their most creditworthy customers.

PRINCIPAL
This term is used to mean the amount of money borrowed or the amount of the loan.

PRINCIPAL BALANCE
The balance of the amount of the loan that is outstanding.

PRINCIPAL AND INTEREST ( P & I )
Used to indicate that principal and interest are included in a quoted monthly payment on real property.

PRINCIPAL, INTEREST, TAXES AND INSURANCE ( P I T I )
Used to indicate that the four major portions of a monthly payment on real property are included in the quoted payment.

PRIVATE MORTGAGE INSURANCE ( P M I )
Insurance against loss by a lender in the event of default by the borrower.
The premium is paid by the borrower and included in the mortgage payment.

PRIVATE TREATY SALE
A buyer purchases a property from a seller without using an estate agent.

PROMISSORY NOTE (Also called a “Note”)
A promise in writing and executed by the maker, to pay a specified amount during a limited time or on demand, or at sight, to a named person or on order or to the bearer. Establishes personal liability for repayment of the debt.

PROPERTY TAX
A tax on both real and personal property, the amount of which is determined by the assessed value of the property.

PRO RATA
To divide in proportionate shares, such as taxes, insurance premiums, etc. between buyer and seller to time of use or the date of closing.

PROVISION FOR CREDIT LOSSES
The bank makes a provision for estimated losses that it expects to arise from loans that it has made.

Q

R
REAL ESTATE
(1) Land and anything permanently affixed to the land such as buildings, fences and those things attached to the buildings, such as light fixtures, plumbing and air conditioners, or other such items, which would be personal property if not attached.
(2) May refer to rights in real property as well as the property itself.

REAL PROPERTY (see REAL ESTATE)

REALTOR
A Realtor is a licensed real estate agent specializing in the representation and sale of homes, properties and developments.
A Realtor may represent the buyer, the seller or both parties.
The Realtor makes money by taking a percentage of the proceeds in the event of a sale.

REBATE
A refund or incentive. e.g. first home buyers grant.

RECONCILIATION
Checking all bank account transactions to make sure that the bank's records and your records agree.

REDRAW FACILITY
A special loan facility where you can make extra repayments and then access those additional funds if you need them.
There will usually be special limitations.

REFINANCING
Refinancing is the restructuring of a mortgage loan to lower the interest rate and or create a fixed interest rate.

REMAINING ECONOMIC LIFE
Number of years between the time of an appraisal (valuation) and the point of time when an improvement becomes economically valueless.

RENTAL GUARANTEE
A promise by a developer to maintain a certain level of return on a property investment for a certain period.

REPLACEMENT COST
The current cost to construct an exact duplicate of the subject property having the same utility, design, layout and quality of
workmanship, but using modern materials.

REQUISITIONS ON TITLE
The process whereby the buyer may request additional information about the title of the property to be purchased.

RESERVE PRICE
The minimum price acceptable to the seller at an auction.

RESTRICTION
Relating to real property to describe uses prohibited to the owner.

RETAIL BANKING
Those activities and services that a bank provides for individual customers such as savings accounts, personal loans,
cheque cashing and housing loans.

RIGHT OF WAY
An easement giving another the right to pass over or use a strip of land belonging to someone other than the person(s) having the right of use.

RISE AND FALL
A clause in a building contract that allows the final price to increase or decrease according to fluctuations in building material prices.
S
SALES AGREEMENT/SALES CONTRACT
A contract whereby seller and buyer agree to the terms of the sale of real property.

SEARCH
A search of official records to ensure that there are no encumbrances on a property.

SECONDARY FINANCING
A loan secured by a mortgage or trust deed, which is secondary to another mortgage or trust deed.

SECOND MORTGAGE
A mortgage, which ranks after a first mortgage in priority.

SECURITISATION
Bundling a pool of home loans or other assets and converting them into a tradable security which investors can trade.

SECURITY
An asset, usually a property, that provides some sort of guarantee to the lender until the loan is repaid.

SEMI-DETACHED
Two houses or buildings that share a common wall.

SERVICE CHARGE
A fee paid for using a service.

SETTLEMENT DATE
The date on which the buyer finalizes the payment for the purchase and assumes ownership.

SETTLEMENT STATEMENT
A statement prepared by a broker or lender giving a breakdown of costs and disbursements involved in a real estate sale.

SIGNATORY
A person authorized to sign an account or instrument ( e.g. a cheque ).

SIMPLE INTEREST
Interest computed on the principal alone, as opposed to compound interest which is computed on the principal plus interest.

SMART CARD
A card with an embedded computer chip which stores more information, performs more functions and is more secure than a
credit card or debit card.

SOCIETY FOR WORLDWIDE INTERBANK FINANCIAL TELECOMMUNICATIONS (SWIFT)
A co-operative owned by the international banking community that operates a global data processing system for the transmission of financial messages.

SPLIT LOAN
Where several loans form one loan. Part may be variable and part may be fixed in relation to the interest applied to each.

SPREAD
The difference between the interest rate charged to borrowers and the interest rate paid by lenders for their borrowed funds.

STATEMENT
A computer printout listing all the transactions in a bank account for a period of time.

STEPPED
Where different rates of interest are applied to different portions of the account balance.
e.g. 1% to the first $5,000 and 2% to the next $5,000 etc.

STRATA TITLE
The title that gives you ownership of a unit within a building block. You become a member of the body corporate.
You do not need to seek permission from anyone else to sell your unit.
SUBORDINATE
To make subject or junior to something, (e.g. one mortgage is subordinate to the first mortgage).

SURVEY
The measurement of the boundaries of a parcel of land, its area, and sometimes its topography.

SWAP
An agreement between two businesses to exchange commodities, payments or other financial products to reduce the risk of
volatile market conditions or to obtain a better price or rate. For example, interest rate swaps, where floating rate interest is
exchanged for fixed rate interest, protects a corporation against rises in rates or allows it to take advantage of a better rate.
A cross-currency swap enables two parties to enter into an agreement in which one exchanges its currency for the other's to
meet their separate requirements.

SYNDICATED LOANS
Loans to a company backed by a group of banks in order to share the risk in a large transaction among several financial institutions. There is usually a lead bank and several participating banks.


T
TAX-SHELTER
A tax shelter is a savings/investment plan which offers significant tax savings.

TENANCY IN COMMON
An undivided ownership in real estate by two or more persons. The interests need not be equal and in the event of the death of one of the owners, no right of survivorship exists with the other owners.

TERM
The maximum time allotted for a loan to be repaid.

TERM DEPOSIT
An investment product in which you deposit a fixed sum of money for a set period of time and are paid interest.

TERM LOAN
A loan intended for medium-term or long-term financing to supply cash to purchase fixed assets such as machinery, land or
buildings or to renovate business premises.

TITLE
The evidence one has of right to possession of land.

TRANSACTION
Action in a bank account. It may be a deposit, withdrawal, debit card payment, service charge or interest payment.

TRANSFER
The act by which the title to property is conveyed from one person to another.

TRAVELLERS’ CHEQUES
These are a safe way to carry large amounts of money if you are going on a trip. They are considered to be the same as cash,
but can be replaced if they are lost or stolen. You can buy them at your bank for a small fee. If you have a special service package you may not have to pay this fee.

TREASURY BILLS (T-Bills)
Short-term government obligations that are payable to the bearer and sold on a discount basis The difference between a
T-bill's market or discounted price and its face or redemption value is effectively interest if the T-bill is held to maturity.

TRUST DEED
An instrument used in place of a mortgage. Property is transferred to a trustee by the borrower (trustor) in favor of the
lender (beneficiary) and reconveyed upon payment in full.

TRUSTEE
(i) one who is appointed, or required by law, to execute a trust.
(ii) one who holds title to real property under the terms of a deed of trust.
TRUSTOR
The borrower under a deed of trust. One who deeds his property to a trustee as security for the repayment of a loan.




U
UNCOLLECTED FUNDS
Funds that have been deposited in an account or cashed against an account by a cheque that has not yet been cleared through the check collection process and paid by the drawee bank. Financial Institutions typically place a temporary hold on their customers' uncollected funds, making those funds unavailable for withdrawal until the time period of the hold expires.

UNDERWRITING
Where a third party guarantees (underwrites) the loan. The underwriter determines the borrower’s ability, capability and willingness to repay a proposed loan, the proper structuring of said loan and that the collateral value is there.

UNDUE INFLUENCE
Taking any fraudulent or unfair advantage of another’s weakness of mind, distress or necessity so that their decision is not their free act.

UNENCUMBERED
When a property is free from any liabilities or encumbrances.

URBAN
Pertaining to closely settled property such as a city or town.

USEFUL LIFE
The true economic value of the asset (building) in terms of years of use to the owner.

USURY
Charging a rate or amount of interest that is greater than permitted by law. An exorbitant rate of interest.



V
VALUATION
The estimating of the value of a property. An appraisal.

VALUE
In real estate lending, the lesser of the sales price or appraised value of a property.

VARIABLE INTEREST RATE
Where the rate varies according to the interest rates in the marketplace.

VARIABLE RATE LOANS
Loans where the interest rate can go up or down.

VENDOR
The party who offers a property for sale.

VENTURE CAPITAL
Commonly refers to funds that are invested by a third party in a business either as equity or as a form of secondary debt.

VOLUNTARY LIEN
A Lien placed against real property by the voluntary act of the owner. Most commonly, a mortgage or deed of trust.



W
WAIVE
To knowingly abandon, relinquish or surrender a right, benefit or claim.

WARRANTY DEED
A deed used to convey free title to real property which contains warranties to clear title.

WITHDRAWAL
Money taken out of an account. The withdrawal may be in cash, by cheque or debit card, or by automatic withdrawal.

WRAP-AROUND MORTGAGE (also called A.I.T.D. or ALL INCLUSIVE TRUST DEED)
A second mortgage with a face value of both the amount it secures and the balance due under the first mortgage.
The mortgage under the wrap-around collects a payment based on its face value and then pays the first mortgagee.



X


Y

YIELD
The true return received from an investment, taking into account inflation.



Z

ZONING
The division of a city or county by legislative regulations into areas (zones), specifying the uses allowable for the real property in these areas.