Mortgage Glossary

Mortgage-related jargon can be confusing, but we're here to help. Our glossary will help you
understand commonly used words and phrases so you can buy your next home with confidence.


Accrued depreciation

The total depreciation of a property over a period of time. Usually the difference between the replacement value at purchase and its present appraised value.

Application Fee


see  Valuation.

An estimate of the value of a property, make by a qualified professional called an appraiser


An increase in a property’s value over time. Property can appreciate in value due to increased demand, inflation and/or interest rate changes.


The process of paying the principal and interest on a loan through regularly scheduled installments.


Real Estate auction is a method of sale. The property is sold by an auctioneer, either on the site or in an auction room. The highest bidder secures the property, providing the bid is it acceptable to the Vendor.

Authority to sell

The official contract a vendor signs to give an agent permission to sell a property on their behalf. The contract also usually details the agent’s fees and any advertising costs.


Breach of contract

When a seller or buyer dishonours one of more of the conditions in the sale contract, such as a vendor failing to make agreed repairs or a buyer changing their mind after the cooling-off period.

Bridging finance

A short-term loan to help cover costs between selling one property and buying another.

Building Inspections

And expert checks out a building for potential problems and reports on these and how much they will cost to remedy. Usually undertaken for a potential purchaser.

Buyer’s advocate

Also known as a buyer’s agent, this is a licensed professional who negotiates the sale on a buyer’s behalf. Think of it as the opposite of a regular real estate agent, who works on behalf of the seller. A buyer’s advocate can also help source property for you.


Capital gains tax

At tax payable when you make a gain on an investment. Half the gain is taxed at the tax payer’s marginal tax rate. There are exemptions available for owner occupied properties.


A legal notice that someone (the caveator) has claimed a particular unregistered interest in a property.

Certificate of title

The legal document certifying property ownership. If you have a mortgage, your lender will hold the certificate until your loan is repaid.

Comparative Market Analysis

An estimate of the value of a property based on an analysis of sales of properties with similar characteristics.

Contract of sale

Is a formal written agreement which spells out the terms and conditions of a sale.


The area of law that deals with the transfer of property from one party to another. Your conveyancer represents your interests as a buyer or seller. They will prepare the contract of sale, research the property and its certificate of title, calculate any owed rates and manage settlement with the lender.

Cooling-off period

A period in which a buyer can legally withdraw from a property sale. Different states and territories have different cooling off periods and a termination penalty may still apply if you withdraw. There is usually no cooling-off period when you buy at auction.


A condition placed on the use of a property, such as a height restriction or a stipulation about building materials.

Credit Report

A search through your existing credit history by a qualified credit bureau to determine if, and the number of times, you may have been delinquent making monthly payments on previous debts. Even when a credit report is for the most part positive, many lenders require written explanation for any negative comments within the credit report. This type of report is usually required to obtain a mortgage loan.


Debt Service Coverage Ratio (DSC)

A 1.0 means breakeven. The ratio is calculated by taking the net operating income and dividing it by the mortgage payments. Most lenders look for a ratio of 1.25 or higher.


The amount of money you put down, normally anywhere from 5 – 25%.

Deposit Bond

Is a financial instrument, issued by an insurance company, which can be used by the purchaser if agreed upon by the vendor, in lieu of a cash deposit.


The wear and tear on a building or fixtures, which you can claim on your income tax if your property is for investment and built after July 1985. You will need a quantity surveyor to prepare a schedule of depreciation on your property to calculate how much you can claim.

Due Diligence

The legal definition: a measure of prudence, activity or assiduity, as is properly to be expected from, and ordinarily exercised by, a reasonable and prudent person under the particular circumstances. In CMBS: due diligence is the foundation of the process because of the reliance securities investors must place on the specific expertise of the professionals involved in the transaction.



A section of land registered on a property title that someone is entitled to use even though they are not the owner, e.g. a shared driveway.


When a neighbour violates the rights of an adjoining property owner by building something on their land.


A restriction or notice placed on land, which is usually listed on the certificate of title. A covenant is an example of an encumbrance, as is an easement (see above). Governments can also register an encumbrance on a property to let buyers know of a prior land use.


The value built up in a property minus any money owed.

1.The difference between the fair market value and current indebtedness, also referred to as “owner’s interest”.
2. The difference between the amount owed on the loan and the current purchase price of the home or property


Fair Market Value

An appraisal term for the price which a property would bring in a competitive market, given a willing seller and willing buyer, each having a reasonable knowledge of all pertinent facts, with neither being under any compulsion to buy and sell.

Fixed Rate

A mortgage with an interest rate that remains constant for the life of the loan. The most common fixed-rate mortgage is repaid over a period of 30 years


Gross Income

Total income, before deducting taxes and expenses. The scheduled (total) income, either actual or estimated, derived from a business or property.


Someone who is willing to sign mortgage loan obligation with you in case you default on your monthly payments. Normally, the cosigner is required to go through the same application and approval process as the original signer of the loan.



The sum paid for borrowing money, which pays the lender’s costs of doing business.

Interest Rate

The sum charged for borrowing money, expressed as a percentage


Lenders’ Mortgage Insurance (LMI)

The cost of securing a loan when you need to borrow more than 80 per cent of a property’s value. LMI covers the lender’s risk should the property value fall, even though the insurance is paid by the borrower.

A type of insurance changed by most lenders to offset the risk of your loan when your down payment is less than 20% of the value of the home

Loan origination Fee

see also Application Fee

Line of Credit

Loan to Value Ratio (LVR)

Proposed loan amount divide by the value of the property.



A legal document signed as security for the repayment of money when you borrow funds to purchase property.


The lender of money.


The borrower of money.


Negative gearing

Borrowing money to buy an investment property and the cost of owning that property (interest repayments, rates, repairs etc.) is more than the income received from rent. In other words, you make a loss, which can be claimed against your income tax.


Off the plan

Buying a dwelling, usually an apartment, before it is built.



1. The amount of debt, not including interest, left on a loan.
2. The face amount of the mortgage.


Stamp Duty

A state tax imposed on property transactions. It is also found on other transactions such as car registrations.

Strata title

Ownership of an individual unit in an apartment or townhouse complex, which also has shared areas, such as a driveway, garden or swimming pool. These shared areas are owned and maintained collectively with the other unit owners.


Tenants in common

When two or more people own a property and each person’s ownership interest is specified as a certain percentage.

Title search

A title search researches the historical and current ownership and usage of a property.

Torrens title

When a purchaser owns both the house and the land on which it is built. This is the most traditional form of home ownership in Australia.



An appraisal is a report that indicates the estimated value of a property. It’s written by a professional appraiser. You might need an appraisal for financing purposes. As the buyer, you pay the appraisal cost.



The usage category applied to a parcel of land by a local council or other government authority. Zoning will determine, for example, if you can build units or operate a business on a property.