Acceleration clause

A provision in a mortgage that gives the lender the right to demand payment of the entire outstanding balance when the first monthly payment is missed.

Agent’s commission

The fee paid to the real-estate agent for selling the property

Amortisation

 Amortisation schedule

The gradual repayment of a mortgage by instalments.

A timetable for payment of a mortgage showing the amount of each payment applied to interest and principal and the balance remaining.

Annual percentage rate (APR)

The total yearly cost of a mortgage stated as a percentage of the loan amount; includes such items as the base interest rate, primary mortgage insurance, and loan origination fee (points).

Appraisal

professional opinion of the market value of a property.

Appreciation

An increase in the value of a property due to changes in market conditions or other causes.

Assessed value

The valuation placed upon a property by a public tax assessor for purposes of taxation.

Assumable mortgage

A mortgage that can be taken over ("assumed') by the buyer when a home is sold.

Assumption

The transfer of the seller's existing mortgage to the buyer.

Binder

A preliminary agreement, secured by the payment of earnest money, under which a buyer offers to purchase real estate.

Board rate

The board rate is also known as “prime rate”. It 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.

Bridging Loan

Short-term finance that covers the gap between the purchase of a new property and the sale of an old property.

 Cap

A provisional limit indicating how much the interest rate or mortgage payments may increase or decrease.

Capital gain

Profit from selling an asset at a higher market price than its cost.

Cash reserve

A requirement of some lenders that buyers have sufficient cash remaining after closing to make the first two monthly mortgage payments.

Caveat

Notification placed on a title deed to warn any purchaser that someone else holds an interest in the property. This ensures it is not sold without the consent of this third party.

Clear title

A title that is free of liens or legal questions as to ownership of property.

Closing

A meeting at which a sale of a property is finalised by the buyer signing the mortgage documents and paying closing costs. Also called "settlement."

Closing costs

Expenses (over and above the price of the property) incurred by buyers and sellers in transferring ownership of a property. Also called "settlement costs."

Commitment letter

A formal offer by a lender stating the terms under which it agrees to lend money to a home buyer.

Conversion Fee

The lender may impose a conversion fee where an existing borrower wishes to change from one loan type to another e.g. Variable Rate Loan to Fixed Rate Loan. Also known as “Conversion fee”.

Conveyance

A legal document by which the ownership of property is transferred.

Cooling-off period

The amount of time either the buyer or seller has to change their minds in a private sale. This does not apply if you buy or sell at an auction.

Cooperative

A type of multiple ownership in which the residents of a multi-unit housing complex own shares in the corporation that owns the property, giving each resident the right to occupy a specific apartment or unit.

Covenant

A clause in a mortgage that obligates or restricts the borrower and that, if violated, can result in foreclosure.

Credit report

A report of an individual's credit history prepared by a credit bureau and used by a lender in determining a loan applicant's creditworthiness.

Debt Service Ratio (DSR)

Maximum of the applicants weekly, fortnightly or monthly wage which will support loan repayments over the agreed loan term. Usually expressed as a percentage.

Deed

The legal document conveying title to a property.

Deed of trust

The document used in some states instead of a mortgage; title is conveyed to a trustee rather than to the borrower.

Default

The failure to make a mortgage payment on a timely basis or to otherwise comply with other requirements of a mortgage.

Delinquency

A loan in which a payment is overdue but not yet in default.

Deposit bond

A guarantee that can be used instead of having to provide a cheque for a 10 per cent deposit while waiting to settle on a property.

Depreciation

A decline in the value of property; the opposite of "appreciation."

Discount points

See “Points”.

Down payment

The part of the purchase price which the buyer pays in cash and does not finance with a mortgage.

Due-on-sale clause

A provision in a mortgage allowing the lender to demand repayment in full if the borrower sells the property securing the mortgage.

Earnest money

A deposit made by the potential home buyer to show that he or she is serious about buying the house.

Easement

A right of way giving persons other than the owner access to or over a property.

Equity Loan

An equity loan account gives you a revolving line of credit secured by the value of your house. This allows you to use the funds for any other purpose such as the purchase of a second property, shares or other investments. The interest rate is generally higher than a standard variable rate, and these accounts are not suitable for everyone.

Exchange of contracts

When the buyer and seller swap contracts of sale.

Fittings

Items that can be removed from the property, such as furniture.

Fixed interest rate

An interest rate that does not vary according to rate fluctuations in the marketplace.

Fixtures

Items that are part of the property, such as baths, dishwashers and curtain rods.

Freehold

This indicates that the dwelling and the land it sits on are owned indefinitely by the owner.

GST

Goods and Services Tax. A five per cent (5%) consumption tax levied on the final consumer of the goods or services

Guarantor

Someone who agrees to be responsible for another person’s mortgage in case of default.

Hazard insurance

Insurance coverage that compensates for physical damage to a property from fire, wind, vandalism, or other hazards.

Holding deposit

A refundable goodwill deposit to show a buyer's intention to purchase.

Homeowner's insurance

An insurance policy that combines personal liability coverage and hazard insurance coverage for a dwelling and its contents.

Homeowner's warranty

A type of insurance that covers repairs to specified parts of a house for a specific period of time. It is provided by the builder or property seller as a condition of the sale.

Inclusions

Items included in the property, such as light fittings, which should be listed in the contract.

Interest

The fee charged for borrowing money

Interest rate cap

A provision limit showing how much interest rates may increase or decrease per adjustment period or over the life of a mortgage. See also “Lifetime cap”.

Joint tenancy

A form of co-ownership giving each tenant equal interest and equal rights in the property, including the right of survivorship.

Late charge

The penalty a borrower must pay when a payment is made after the due date.

Legal Fee

May be charged where an outside party (usually a lawyer) is used to prepare bank and legal documentation.

Lien

A legal claim against a property that must be paid off when the property is sold.

Lifetime cap

A provision of an ARM that limits the highest rate that can occur over the life of the loan.

Loan commitment

See “Commitment letter”.

Loan servicing

The collection of mortgage payments from borrowers and related responsibilities of a loan services.

Loan-to-value percentage (LTV)

The relationship between the unpaid principal balance of the mortgage and the appraised value (or sales price if it is lower) of the property.

Loan-to-value ratio (LVR)

Refers to the maximum amount lenders will approve against the value of any property taken as security for your home loan. For example if you wish to purchase a property worth $100,000 the lender may approve a loan for 80% of the property value. It will then be up to you to provide the remaining 20% plus costs (mortgage registration and stamp duty etc).

Lock-in

A written agreement guaranteeing the homebuyer a specified interest rate provided the loan is closed within a set period of time. The lock-in also usually specifies the number of points to be paid at closing.

Mortgage

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

Mortgage banker

A company that originates mortgages exclusively for resale in the secondary market.

Mortgage insurance

Insurance provided by non-government insurers that protect lenders against loss if a borrower defaults.

Mortgage interest rate

The rate of interest in effect for the monthly payment due.

Mortgage note

A legal document obligating a borrower to repay a loan at a stated interest rate during a specified period of time. The mortgage note is secured by a mortgage.

Mortgagee

The lender in a mortgage agreement.

Mortgagor

The borrower in a mortgage agreement.

Negative amortisation

A gradual increase in the mortgage debt that occurs when the monthly payment is not large enough to cover the entire principal and interest due. The amount of the shortfall is added to the unpaid principal balance to create "negative" amortisation.

Notice of default

A formal written notice to a borrower that a default has occurred and that legal action may be taken.

Offset account

Offset accounts can help reduce your tax bill by offsetting taxable income from deposit accounts against interest paid in after tax dollars on mortgage repayments. However, not all offset accounts are equal, with many not paying the same interest as you are charged on your mortgage.

Origination fee

A fee paid to a lender for processing a loan application. It is stated as a percentage of the mortgage amount.

Owner financing

A property purchase transaction in which the property seller provides all or part of the financing.

PITI

Stands for principal, interest, taxes, and insurance - the components of a monthly mortgage payment.

Points

A one-time charge by the lender to increase the yield of the loan; a point is I percent of the amount of the mortgage.

Prepayment penalty

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

Prequalification

The process of determining how much money a prospective homebuyer will be eligible to borrow before a loan is applied for.

Prime rate

See “Board rate”.

Principal

The amount borrowed or remaining unpaid; also, that part of the monthly payment that reduces the outstanding balance of a mortgage.

Processing Fee

Also called “Application Fee”. Fee which covers basic costs in setting up loan from initial interview to loan drawdown. In Singapore, most lenders choose to absorb this fee.

Purchase and sale agreement

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

Qualifying ratios

Guidelines applied by the lenders to determine how large a loan to grant a homebuyer.

Rate lock

See “Lock-in”.

Real estate sales professional

A person licensed to negotiate and transact the sale of real estate on behalf of the property owner.

Refinancing

The process of paying off one loan with the proceeds from a new loan using the same property as security.

Reverse mortgage

These loans are for retired people who own their own home but have little cash to live on. Such a loan allows the “cash poor, asset rich” to borrow against the value of their home and access the value in it without having to sell it. No repayments are required during the loan term with the total interest, fees and charges being taken out of the estate on the borrower's death.

Second mortgage

A mortgage that has a lien position subordinate to the first mortgage.

Secondary mortgage market

The buying and selling of existing mortgages.

Seller-take-back

An agreement in which the owner of a property provides financing, often in combination with an assumed mortgage.

Service Fee

Usually a monthly fee levied to cover bank cost of administering & maintaining the loan account i.e. fixed and variable costs such as staff, IT software / hardware.

Settlement

See “Closing”.

Settlement sheet

The computation of costs payable at closing that determines the seller's net proceeds and the buyer's net payment.

 Stamp duty

A government tax on financial transactions, calculated according to the sale value.

Strata title

Individual owners of an apartment in a block containing a number of apartments hold a Strata Title covering their portion.

Sub-prime lending

Refers to loans that cater for those who cannot meet the standard income verification and credit history criteria mainstream lenders like banks and mortgage originators use for ordinary borrowers. These loans are usually at higher interest rates to reflect higher risk of these borrowers.

Survey

A drawing or map showing the precise legal boundaries a property, the location of improvements, easements, rights of way encroachments, and other physical features.

Switching Fee

See “Conversion fee”.

Temporary Occupancy Permit (TOP)

This permit allows the legal use of the building pending final clearance. In Singapore, an application for a TOP is free of chanrge and may take up to 14 days for processing.

Tenancy by entirety

A type of joint ownership of property that provides right of survivorship and is available only to a husband and wife.

Tenancy in common

A type of joint ownership in a property without right of survivorship.

Term

The length of a home loan, or a specific portion within that loan. Also called “tenor”.

 Title company

A company that specialises in examining and insuring titles to real estate.

Title deed

A legal document evidencing a person's right to or ownership of a property.

Title insurance

Insurance to protect the lender (lender's policy) or the buyer (buyer’s policy) against losses arising from disputes over ownership of a property.

Title search

A check of the title records to ensure that the seller is the legal owner of the property and that there are no liens or other claims outstanding.

 Transfer tax

Government tax payable when title passes from one owner to another.

Valuation fee

Fee which may be charged if the lender seeks to cover the cost of valuing the property taken as security for the loan. Under a reverse mortgage, some lenders may require revaluations during the term of the loan to monitor their loan-to-valuation exposure.

Variable interest rate

A rate that varies in accordance with the rates in the marketplace. Also called "floating rates".

Zoning

Used by local authorities to control use of property. For example, residential or retail.