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Glossary of Financial Terms

A

account balance – The amount of money you have in your account.

annual fee – The amount charged by the lender each year to cover the administration costs of the loan.

application – A standardised form used to apply for a loan and to record relevant information about the prospective borrower and the proposed property.

appraisal – A written analysis of the estimated value of a property.

appreciation – An increase in the value of property due to changes in the market conditions, ie – inflation.

asset – Anything of monetary value owned by an individual.

B

bad debt – A debt that is not collectible and is therefore worthless to the creditor.

bankrupt – The condition of being unable to pay debts, with liabilities greater than assets.

business loan – A loan granted for the use of a business.

budget – A detailed plan of income and expenses estimated over a specific period of time, helping to manage costs and profits.

C

cash advance – An instant loan obtained from a lending institute.

collateral – Property pledged as security for a debt.

commercial loan – A loan used to finance a company or its working capital needs.

construction loan – A loan used for financing the cost of construction.

contract – An oral or written binding agreement between two or more parties.

conveyancing – A legal process to transfer ownership of property from the seller to the buyer.

credit – An agreement in which a borrower receives something of value in exchange for a promise to repay the lender at a later date.

credit card – A card that allows you to buy goods, services and obtain cash advances on credit.

credit report – A report of a person’s credit history from a credit bureau used by a lender to determine a loan applicant’s worthiness.

D

debit – When money is taken out of your account for something you’ve bought or to repay money you owe.

debt – An obligation to pay an amount owed for funds borrowed.

debt consolidation – The replacement of multiple loans with a single loan, often at a lower periodic payment.

default – Failure to make a required debt payment when it is due.

deposit – Money paid in good faith to assure the performance of a contract.

depreciation – A decline in the value of real or personal property.

direct debit – An amount of money paid regularly and of various amounts, to an individual or a company from your account with your consent.

E

EFTPOS – (Electronic Funds Transfer at Point of Sale) A way of buying goods and services using a fast cash savings, cheque or credit card.

equity – The difference between the market value of your home and your outstanding mortgage balance.

F

finance – The commercial activity of providing funds and capital.

first home owner grant scheme  (FHOG) One off $7000 payment to eligible first home buyers.

fixed interest rate – An interest rate which is fixed for the term of the loan.

G

grace period – The period of time in which you are not required to make payments on a debt.

gross income – Your income before any tax or other deductions have been made.

H

home loan – A residential mortgage loan secured by a primary residence.

I

inflation – An increase in the amount of money or credit available relative to the amount of goods or services available, causing a rise in the price level of goods and services.

instalment – A regularly scheduled periodic payment that a borrower agrees to make to a lender.

insurance – A form of contract that provides compensation for specific losses in exchange for a periodic payment.

interest rate – The cost of borrowing money expressed as a percentage of the amount borrowed.

investment – The money paid to purchase a capital asset or a fixed asset.

investment property – A property that is not occupied by the owner, usually purchased to generate profit.

J

jargon – The specialized language of a particular profession, used predominantly in contracts.

K

L

lender – A person or company that supply funds.

liability – The debts or financial obligations of a person or company.

liquidate – When a company ends from being unable to pay off its debts.

loan – Borrowed money that is usually repaid with interest.

loan term – A lender’s agreement to make a loan on particular terms, including interest rate, fees and charges.

low doc loan – A loan requiring a lower level of verification documents.

M

mortgage – A legal document that pledges a property to the lender as security for payment of a debit.

N

no doc loan – A loan requiring no documentation of income.

O

occupancy rate – Percentage of currently rented units in a building, neighbourhood, complex, or city.

owner finance – A property purchase transaction where the seller provides the financing.

P

personal loan – Money borrowed to meet personal needs.

profit – The positive gain from an investment or business operation after expenses.

property – That which is legally owned by an individual or property.

purchase agreement – A written contract signed by the buyer and seller stating the terms and conditions under which a property will be sold.

Q

quick cash – Liquid assets including cash on hand and assets readily convertible to cash.

R

rate – The annual rate of interest on a loan, expressed as a percentage of 100.

refinance – To repay one or more existing mortgage loans by getting a new loan.

renovation loan – A loan used to make improvements to an existing property.

repayment plan – An agreement between a lender and a borrower, made to help the borrower repay instalments.

risk – The likelihood of loss or less than expected returns.

S

self employed – An individual who operates a business as a sole proprietor.

second mortgage – A loan taken after the first mortgage and is secured against the same assets as the first.

security – Property that is pledged as collateral for a debt.

secured loan – A loan that is backed by collateral.

settlement – The time when loan and mortgage documents are formally signed and the loan transaction is completed.

short term loan – A loan scheduled to be repaid in less than a year.

sole ownership – Ownership of property by a single person or entity.

T

term – The period of time during which loan payments are made. At the end of the loan term, the loan must be paid.

title – A legal, written instrument detailing an individual’s lawful possession of a property.

trade equity – Equity from a buyer giving existing property as trade for all.

U

underwriting – The process of verifying data and approving a loan.

unsecured loan – A loan that is obtained without collateral.

V

variable rate – An interest rate that changes with movement in the market.

W

warranty – A promise contained in a contract.

write off – When a loan is uncollectible.

X

Y

yield – A measurement of the rate of earnings from an investment.

Z

zone – An area reserved for specific limited use, often subject to restrictions or conditions

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