Home loans Read up on ...

Glossary of terms

100% offset

If this option is available on your home loan, it means that the money you have in your transaction account acts the same as if it was in your mortgage account – it reduces the balance of your loan on which interest is calculated, which in turn reduces your interest repayments allowing you to pay your loan off sooner.

Appraised value

Appraised value is the estimate of the value of a property which is being used as security for a loan.

Body corporate

A body corporate is the corporation controlled by the owners of units within a multiple occupancy building which manages the building and common areas.

Comparison rate

The comparison rate helps you compare one loan with another so you know how much you will pay over the life of the loan. While the interest rate is a major component, it’s not only the cost. There are other fees and charges that affect the true cost of the loan. The comparison rate calculates fees associated with setting up the loan, such as establishment and service fees. It doesn't include government charges or early pay out fees.

Contract of sale

A contract of sale is the written agreement outlining terms and conditions for the sale of a property.

Conveyancing

Conveyancing is the legal process for the transfer of ownership of real estate.

Cooling off period

This is a period of time, which may vary between 24 hours and 14 days from the time it is signed (depending on the type of contract), when you or your organisation can decide not to continue with a contract. Cooling off periods vary in each state of Australia .

Direct debit

A direct debit is an automatic funds transfer from one account to another. Your can set up a direct debit to make your home loan repayments.

Disbursements

Disbursements are the incidental costs incurred by a solicitor when acting for a client, e.g. searches, certificates, past records, etc.

Draw down

Draw down refers to the transfer of money from a lending institution to the borrower before or after the loan has settled.

Extra repayments

If this feature is available on your home loan, you can make extra repayments that will reduce your interest.

Equity

Equity indicates your financial interest in a property or business enterprise, e.g. your equity in your house is the difference between its value and the amount you owe on the house.

Establishment fee

The fee charged when applying for a new home loan, payable on drawdown of funds.

Fixtures

Fixtures refers to items that would cause damage to a property if they are removed. If a seller wishes to remove fixtures this must be stated in the contract of sale and damage made good by the seller.

Guarantor

A guarantor is someone who agrees to be responsible for the payment of the loan if the borrower defaults or is unable to pay.

Holding deposit

A holding deposit is an amount of money put into a bank account, or left with a person or company, to secure the purchase of an item.

Honeymoon period

The honeymoon period refers to the first year of a loan when the home loan interest rate is reduced.

Interest only loan

An interest only loan lets you repay only the interest during the term of your loan. At the end of the loan term, you repay the principal as a lump sum or refinance the loan. It means repayments are lower than with a standard principal and interest loan.

Line of credit

A line of credit is an amount of money that can be borrowed, but on which interest is only paid when some or all of the credit is assessed.

Loan to value ratio

Loan to value ratio (LVR) is the amount of your loan compared to the value of your property or asset purchased with the loan funds, expressed as a percentage. For example, a loan of $400,000 to buy a property worth $500,000 results in a loan to value ratio of 80%. Banks place a limit on the loan to value ratio depending on things such as the type of property, the location and the financial position of the borrower.

Low Doc

Low doc is a loan application method you can use if you are self employed. It means you do not need the standard income verification to apply for a home or investment loan.

Mortgage

A mortgage is a legal document drawn up between a borrower and lender. It gives the lender a conditional right to the property held as security for the repayment of the money lent.

Mortgage insurance

Mortgage insurance insures your lender against non-payment or default on a residential property loan. Mortgage insurance makes it possible for buyers to borrow up to 100% of a property’s value.

Mortgagee

The mortgagee is the person or organisation who lends the money to purchase the goods or property.

Mortgagor

The mortgagor is the person or organisation who borrows the money to purchase the goods or property.

Parental leave

If this feature is available on your home loan, you can choose to reduce your repayments by up to 50% for as long as 6 months when you have a child. Conditions apply.

Portability

If this feature is available on your home loan, you can take your home loan with you when you move to another property.

Principal

Principal is the amount of the loan upon which interest is calculated and charged.

Progress redraws

If this feature is available on your home loan, you can make progress payments to builders as construction work is completed.

Redraw

If this feature is available on your home loan, you can access overpaid funds in your home loan for any purpose at any time. To set up a redraw facility fill out the Redraw Authority form (PDF 58kb).

Reduced repayment

If this feature is available on your home loan, you can reduce your repayments by up to 50% for as long as 6 months during periods of large expenses or reduced income, such as extended holidays or renovations.

Repayment holiday

If this feature is available on your home loan and you have built up extra funds in your loan, you can stop making repayments for a while.

Security

Security refers to the property Westpac can claim if a borrower defaults on their loan. It is usually the property being purchased.

Serviceability

Serviceability refers to your capacity to make and meet repayments on a loan, based on your expenses and income.

SmartPay

SmartPay is a feature available on some home loans which lets you deposit all your income into your loan account. You can then arrange automatic transfers to pay your bills and access regular cash deposits. Your interest payments are reduced while funds remain in your loan account. To activate SmartPay fill out the SmartPay Authority form (PDF 188kb).

Stamp duty

Stamp duty is a state government tax paid for 'stamping' of legal documents. The amount varies according to the amount borrowed and the purchase price.

Strata title

Strata title is a title which identifies the owner of a 'unit' of a larger building which they can sell, lease or transfer at their discretion. It also entitles the owner to be a member of the body corporate.

Title Deed

A title deed is a registration document showing who owns a property.

Title search

A title search is a search of records registered at the land titles office to confirm interests in a particular property. A title search shows interests such as proprietor, mortgagees and charges. The search also reveals any restrictive covenants and easements which affect the estate or interest.

Top up

Top up is a feature available on some home loans which lets you increase the limit on your existing loan.

Vendor

The vendor is the person who offers a property for sale.