Financial Jargon Buster
Bank Jargon Explained
Acceptance: Usually, acceptance of an offer, according to the terms of the offer, creates an enforceable agreement or contract.
Agent: A person authorized to act on behalf of another person in the sale, purchase, letting or management of property. A real estate agent must be licensed by the relevant authority in their State.
Allotment: When a larger area of land is subdivided into smaller pieces, these smaller parcels of land are known as allotments. Also referred to as a “lot”, “building block” or “block of land”.
Amenity: Is a characteristic or feature of a neighborhood.
Apartment: See Home Unit
Appreciation: The increase in the value of property caused by economic factors like inflation, or an excess of demand over supply for that property type.
Auction: A public sale in which property (or an article) is sold to the highest bidder.
Bank: From the Italian Banca meaning ‘bench’, the table at which a dealer in money worked. A bank is now a financial institution which offers savings and cheque accounts, makes loans and provides other financial services, making profits mainly from the difference between interest paid on deposits and charged for loans, plus fees for accepting bills and other services.
Battleaxe: A block of land shaped like an axe, where the handle is in the approach. Generally situated between other blocks, thus having no apparent street frontage.
Body Corporate: All of the owners collectively of the common property in a block of units. The council of the Body Corporate, which is elected by the members, meets regularly to discuss various matters relating to the administration of the building (for example, upkeep of common property).
Bond: A sum of money paid by a tenant and held by the Rental Bond Board to protect against losses from non-payment of rent and damage done to the rental property.
Boundary: A line separating adjoining properties.
Breach of Contract: Breaking the conditions of a contract.
Bridging Finance: Finance obtained over a short period, as a “bridge” to long-term funding. Higher interest rates may be charged for bridging finance.
Building Regulations: Rules of a legal or statutory nature by which local councils control the manner and quality of the building. They are designed to ensure public safety, health and minimum acceptable standards of construction.
Building Society: Co-Operative banking enterprise financed by deposits on which interest is paid and from which mortgage loans are advanced on homes and real property.
Caveat: “Beware” – if a caveat is lodged on a title to land, it warns a person buying the property that a third party (party which lodged the caveat) has some right or interest in the property.
Caveat Emptor: “Let the Buyer Beware” – this principle of law requires the buyer to be satisfied with the item they wish to buy before buying. The buyer purchases the property “as is”
Certificate of Title: A document identifying the ownership of land. It shows who owns it and whether there are any mortgages or other encumbrances on it.
Chattels: Property other than real estate. Moveable possessions which may be included in a sale, for example; furniture.
Clear Title: A vendor has a clear title when there are no interests (like an outstanding mortgage) on the vendor’s title.
Code of Practice: The MIAA Code of Practice is a developed statement of principles dealing with industry practices which are designed to set a standard of best industry practice and fair dealing between customers and MIAA members.
Commission: A fee or payment made to a real estate agent for services successfully rendered (for example, someone who hires an agent to sell his/her home pays the agent a commission when the home is sold).
Common Area: An area which is available for use by more than one person (for example, home units have common areas like stairs, driveways, store rooms).
Common Law Title: Usually referred to as “old system title”, it consists of a series of title documents called “a chain of title”. A title is clear only if every document in the chain is available and complete. Legal costs of acting on a purchase of Old System Title land are higher than on a purchase of Torrens Title land, because making a thorough investigation of the chain of title can be complicated and time consuming. Old System Title may be converted to Torrens Title, and is often automatically converted to Torrens Title following a sale.
Compulsory Acquisition (Resumption): The power of a government authority to purchase property from an owner without the owner agreeing to sell. Contract of Sale: A document which sets out the terms and conditions of sale between the vendor and the purchaser (referred to as “Contract”).
Conveyance: The transfer of ownership of property from the vendor’s name to the buyer’s name.
Covenant: An agreement noted on the title to property requiring the property owner to adhere to certain terms, conditions or restrictions regarding a property. The nature of any covenant over a property should always be established before you enter into a contract to purchase the property.
Cover Note: A document issued by an insurance company to temporarily insure a property until a formal policy is issued.
Deed: A formal document including special signing requirements recording an agreement, obligation or conveyance of property.
Credit Union: A financial cooperative, one of a number of varieties of non-bank financial institutions supervised by the Australian Financial Institutions Commission, which accept deposits from, and provide loans to, their customers (members).
Deposit: A deposit is normally paid by the buyer at the time of exchanging contracts. It is normally between 5-10% of the total purchase price.
Dual Occupancy: A block of land or existing dwelling which is zoned in a way which allows the owner to erect a building which has two distinct living arrangements (for example, a duplex or a house with a granny flat attached).
Duplex: A two-storey block of apartments with one apartment covering each floor.
Equity: The part of something – asset, house or company – which you own. What the professionals call shares.
Fittings: Goods or articles that can be removed from a property without causing damage to it.
Fixtures: Items like built-in cupboards, bath, toilets and stove that are intended to form part of a property and that usually cannot be removed from a property without causing damage to it.
Free Standing: A dwelling which stands independently of others.
Gazumping: Gazumping may take two forms:
1. The intending buyer believes that the property has been secured by payment of a holding deposit, and proceeds to arrange finance, legal and other matters. When ready to exchange contracts, the intending buyer finds that another buyer (of which he was unaware) has exchanged contracts on the same property
2. The vendor or real estate agent accepts two or more deposits and then before contracts are exchanged, tells the intending purchasers that the price has gone up. The intending buyers are then left to outbid each other as if it were an auction.
Home Unit: A residential dwelling grouped with others, having shared common areas and owned under Strata Title, Company Title or other group title system.
Interest Only Loans: The amount borrowed is not repaid until the end of the term of the loan. Repayments consist of interest, fees and charges.
Inventory: A list of items included with a property, usually furniture, furnishings and movable items.
Investment: The purchase of an asset (like real estate) in order to produce capital gain on resale or to earn income or both.
Joint Tenants: Joint tenancy is the holding of property by two or more persons in equal shares.
Land Tax: A State government tax payable by owners of property based on the unimproved capital value of the property.
Lease: A lease is a document granting possession of a property for a given period without conferring ownership. The lease document specifies the terms and conditions of occupancy and rent payable.
Lender: A term used to describe the bank in the mortgage industry. The bank “lends” the money to people
Lender’s Mortgage Insurance: This covers the lender’s risk if a borrower defaults on their home loan and the lender has to sell the property securing the loan for less than what is owed on the loan.
Lessee: A person who obtains possession of a property under a lease.
Lessor:A person who owns a property and allows another to occupy it under a lease.
Mortgage Industry Ombudsman Scheme: The Mortgage Industry Ombudsman Scheme (MIOS) has been established by the Mortgage Industry Association of Australasia pursuant to the MIAA Code of Practice.
MIOS: This is an Independent Dispute Resolution Process providing to Customers an alternative to other legal proceedings to resolve disputes free of charge to those customers.
Mortgage: A legal document which gives a lender an interest over a property to secure the payment of money, or the performance of an obligation owed, to a lender.
Mortgage Industry Association of Australasia: The ruling body for Australia’s mortgage industry. The MIAA works with the all State & Federal Governments to set the standards in the Australian Mortgage Industry.
Mortgagee: Someone who lends money on the security of a mortgage.
Mortgagor: Someone who borrows money on the security of a mortgage.
Old System Title: See Common Law Title
Option to Buy: A legal document giving a person a right to buy. The price of the option and the period in which it must be exercised are specified in the option. Usually, a fee is paid and if the person proceeds to buy, the amount paid for the option is deducted from the purchase price. Where the person does not proceed to buy the property, the option fee is not refundable.
Principal and Interest Loan: The principal and interest loan is the most common form of housing loan. The repayments through the term of the loan include both interest and principal and reduce the balance of the loan, so it is repaid in full over the term of the loan.
Private Sale: The seller (vendor) does not engage an estate agent, but acts for himself or herself and so avoids paying agent’s commission. The seller deals directly with the buyer.
Property Management: The management of a property on behalf of the owner.
Rates: The amount charged by the local council or water authority to provide services to a property.
Real Property: Land with or without improvements on it.
Reserve Price: This is the minimum price a seller has specified that they will accept to sell their property at auction.
Search (title): The process of investigating or examining title to land, to ascertain if the vendor has the right to transfer ownership. A title search reveals the names of the owner and other precise details of the property, like the existence of any restrictive covenant, encumbrance or caveat on the title.
Semi-Detached: Two houses joined together by a common wall.
Settlement: When the sale of a property is legally finalized.
Stamp Duty: A State Government Tax. For contracts of sale it is calculated according to the sale value on the contract. For mortgages, it is calculated on the amount secured by a mortgage.
Strata Title: A system of title that allows the owner of a unit, in a block of units, to have separate title for that unit.
Survey: Shows dimensions and boundaries of land and location of buildings.
Tenancy: The right to occupy land or buildings as provided by the terms of a lease or other agreement.
Tenants in Common: This is the holding of property by two or more persons in specific shares. If one person dies, their share passes according to the terms of their will.
Terrace: One of a row of houses joined together with common walls.
Torrens Title: The name given to the government system of recording ownership of land. It’s by far the most common land title in Australia and the cheapest title to buy or sell. Once you are registered on the title you are taken to be the owner.
Town House: Two-storey attached dwellings usually registered under Strata Title.
Transfer: A document registered at the Land Title Office recording the change of ownership of a property.
Unencumbered: Usually describes a property free of mortgage interests.
Valuation: A written opinion of a property’s value by a valuer.
Vendor: A person who offers a property for sale.
Villa: Single-storey dwelling usually registered under strata or community title.
Zoning: Description of the allowable uses of land, as set out by local councils or planning authorities.