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Dictionary
Dictionary of Finance Terms
Listed below are just a few of the more frequently used terms you will encounter when considering a home loan. Should you require further clarification, or help with any terms not listed, please don't hesitate to ring Russell Moody on (03) 9431-2998.
ALL-IN-ONE FACILITY
This lets you deposit all of your money into your loan account and draw on it
for smaller expenses.
DAILY REDUCING
Interest is calculated daily. When you make a repayment, the loan is
reduced by that sum, and interest on the following day is calculated on
the lower amount.
EQUITY
The amount of money you would have if you sold your home and paid off your
home loan.
INTEREST-ONLY LOAN
You only pay interest owing on the loan during the term of the loan; the
principal is payable at the end of the loan term, or you can apply to start a
new loan.
LENDER'S MORTGAGE INSURANCE (LMI)
Paid by the borrower when loan exceeds 80% of the property's real value or
sale price. It protects the lender against financial loss if you renege on
your payments. Not to be confused with mortgage protection insurance.
LINE OF CREDIT
A loan arrangement which lets you borrow, pay back then re-borrow any amount up to the specified limit.
MORTGAGE
A legal document detailing the terms and conditions applying to the lending
of money secured by property.
MORTGAGE OFFSET ACCOUNTS/REVOLVING CREDIT
Any money you have in a linked savings account will reduce the interest
amount payable on your loan.
MORTGAGE PROTECTION INSURANCE
Protects the borrower by continuing repayments in the event of sickness or
job loss.
PRINCIPAL AND INTEREST LOAN (P&I)
One of the most commonly available loans. P&I is calculated on a monthly
basis and your monthly repayment is deducted from that figure.
REDRAW
A feature which lets you make additional repayments on your home loan and
then 'reborrow' that money later if the need arises.
SETTLEMENT
When the balance of the contract price for a property is paid and ownership
is transferred from seller to buyer. |
