Glossary

AAAPR

The average annual percentage rate (AAPR) wraps up interest payments and fees and expresses all these costs in one rate. It is designed to reflect the total annual cost to a borrower of a loan. All lenders must disclose this benchmark rate in their advertising of home loans and personal loans from July 2003. In Australia, the AAPR is officially called the ‘Comparison Rate’.

Accrued Interest

Interest calculated and added to the interest amount payable, but which is not yet paid.

Amortisation

Scheduled repayment of a loan through regular instalments over a period of time (e.g. weekly, fortnightly or monthly repayments over a 30 year term). The borrower pays the interest and part of the principal in each repayment. Contrast to “Interest Only Loan”.

Application Fees

Fees that Lenders charge to consider a loan application. These are paid up front and are usually not refundable unless the loan is refused.

Arrears

The total of overdue loan repayments.

Assets

Real estate, securities, cash and other goods owned by individuals.

Basic or ‘no frills’ loans

Many lenders offer a class of home loan which has a lower variable interest rate than their standard variable rate loan. The trade off is that these discount loans generally have less flexibility and fewer features, eg. no extra repayments can be made, the repayment level cannot be varied or no redraw is available.

Basic Rate

Applied to loans commonly called ‘No Frills Loans’ which are generally cheaper than Standard Variable Rate Loans but do not have features such as a redraw facility or mortgage offset.

Break Costs

Relates to the penalty fees charged when a borrower terminates a fixed-rate loan contract before the expiry of the fixed-rate period

Bridging Finance

A short term Loan that covers a financial gap between the purchase of a property and the sale of a current property.

Capped Rate Loan

A Loan where the interest rate is guaranteed not to exceed a stated rate for a fixed period of time. The interest rate can fall.

Certificate of Compliance

A certificate issued by Council (for a fee) confirming that all buildings on the land comply with Council’s building regulations.

Certificate of Title

A certificate issued by a government body that describes a title reference to a particular parcel of land, the registered owner of that land and any encumbrances (such as a mortgage) registered against the title.

Community Title

A property title where several dwellings are erected on an estate, where the owners have access to a community club house, swimming pool, barbecue area, tennis court etc. The owners have to pay levies for upkeep on the community facilities.

Company Title

A type of ownership for a unit/flat/apartment in a building that is owned by a company. A purchaser of a unit/flat/apartment buys particular shares in the company which gives the purchaser the right to occupy the unit/flat/apartment. Lenders are generally not enthusiastic about lending on company title properties.

Comparison rate

All lenders must disclose a benchmark comparison rate in their advertising of home loans and personal loans since July 2003. This Comparison Rate is designed to reflect the total annual cost to a borrower of a loan. It wraps up interest payments and fees and expresses all these costs in one rate, or the average annual percentage rate (AAPR). On the Infochoice website, to make comparisons between products easier, the comparison rates displayed in tables are based on uniform amounts and terms:

Home loan Comparison Rates are based on a loan amount of $150,000 and a term of 25 years.

Personal loan Comparison Rates vary depending on the rate type and term: Variable – Comparison rates based on $30,000 over 5 years

1 Yr Fixed – Comparison rates based on $1,500 over 1 year
2 Yrs Fixed – Comparison rates based on $5,000 over 2 years
3 Yrs Fixed – Comparison rates based on $10,000 over 3 years
4 Yrs Fixed – Comparison rates based on $20,000 over 4 years
5 Yrs Fixed – Comparison rates based on $30,000 over 5 years
6 Yrs Fixed – Comparison rates based on $40,000 over 6 years
7 Yrs Fixed – Comparison rates based on $50,000 over 7 years

Full comparison rate schedules giving rates based on a variety of amounts and terms are available from the lenders.

Covenant

Imposes conditions on the use of, or the nature of the dwellings erected on, a parcel of land.

Credit Bureau

An organisation to which Lenders subscribe that holds credit information on individuals. For a fee, it is possible to obtain a listing that details your credit history.