Finance Glossary

Capital Value

The value of a parcel of land including improvements. This is normally referred to as CV or Council Value. This vale can normally be located on a council rates notice, water rates or directly from the lands titles office.

Caveat

A warning to the buyer that there is someone interested in the land or a particular requirement must be observed.

Certificate of Title

A document or certificate issued by the Registrar-General pursuant to the Real Property Act 1886.

When issuing a certificate of title, the Registrar-General is effectively certifying that the person named as the registered proprietor has title to the land described in the certificate, subject to any encumbrances, liens, estates or interests that are notified on the original certificate. Certificates of Title or CT as they are generally known have both a value and folio number.

Community Plan

A plan of community division, dividing land into lots and common property under the Community Titles Act.

Comparison Rate

An interest rate calculation taking into account the advertised interest rate, upfront fees and fees over a 25 or 30 year period.

Cooling Off Period

The time a buyer or seller has to opt out of a contract (does not apply to auctions).

Conveyancing/Broking

Conveyancing or land broking is the process by which the ownership to land is transferred, or conveyed, from one person to another.

Credit Bureau

An organisation to which Lenders subscribe that holds credit information on individuals.

Encumbrances

An Encumbrance is a document which is created to impose a restriction or liability over the land.

Equity

The owners interest in the property. For example the property value is $250000 and $100000 is the outstanding loan amount then the equity in the property is $150000.

Fixed Rate Loan

A fixed rate loan is a loan that has a fixed interest rate and therefore fixed loan repayments. The time period of these loans can vary, but you can usually “lock in” your repayments for between 1-5 years. Although the fixed rate period may be 3 years, the total length of the loan itself may be 25 or 30 years. At the end of the fixed loan period you can decide whether to fix the loan again for another period of time at the current market rates or convert the loan to a variable interest rate for the remaining time left of the loan.

Freehold

Absolute ownership of the property by the proprietor of the land.

Guarantor

Someone accepting formal responsibility to the Bank/Lender for something such as paying another person’s debt in the case of default. A Guarantor may also offer extra security.

Interest-only Home Loans

You repay only the interest on the principal during the term of the loan; therefore, repayments are lower than with a standard principal and interest loan. At the end of the interest only period – usually one to five years – you must start making Principal and Interest Repayments over the remaining term of the loan.

Joint Tenants

Two or more people holding land under a joint tenancy. Each joint tenant is entitled to the use, possession, and enjoyment of the whole of the land, subject to the rights of the other joint tenants.

LVR

Loan to Value Ratio. Effectively expresses the loan amount as a percentage of a property’s value. E.g. a $100,000 loan on a property worth $200,000 => $100,000/$200,000 => 50% LVR.

Mortgage

The means by which the property of a debtor is made security for the payment of a debt. A mortgage may be of a real or personal property. A mortgage of land under the RPA takes the form of an instrument under which the registered proprietor changes his or her interest in the land with the payment of the debt. An example of a mortgage of personal property is a bill of sale.

Mortgage Broker (or Finance Broker)

A person or organisation offering to organise or sell loans on behalf of a group of lenders.

Mortgagee

The Lender under a Mortgage.

Mortgagor

The Borrower under a Mortgage.

Principal

The amount owing on a loan, on which interest must be paid.

Principal & Interest Loan

A loan in which both the principal and interest are repaid, during the agreed term of the loan.

Security

The collateral taken by the lender to insure against default by the borrower, on the loan.

Settlement

Occurs after both parties have exchanged contracts and agrees to the terms of the transaction.

Stamp Duty

State tax relating to purchasing a property. Stamp Duty is calculated of the purchase or transfer price of a property on a sliding scale.

Strata Plan

A plan dividing land into units and common property under the Strata Titles Act 1988.

Strata Corporation

A corporation created by the deposit of a strata plan and consisting of the registered proprietors of the units defined on the plan.

Tenancy in Common

One of the two main ways in which two or more persons may hold land in co-ownership (the other being a joint tenancy). Each tenant is entitled to a distinct but undivided share in the land. Note that, although having a distinct share in the land, this does not entitle the proprietor of the share to the exclusive ownership of any identifiable portion of it. There is no right of survivorship under a tenancy in common, and on the death of a tenant in common his or her share will pass according to his or her will or, in the absence of a will, according to the laws of intestacy.

Title Deeds

Legal documents signifying ownership of real property.

Torrens Title System

The system employed in all Australian jurisdictions under which title to land is conferred by the official registration of a dealing in that land. The fundamental principles of the system are:

  • that it is the act of the Registrar-General in registering a dealing which passes the legal title to land or creates legal interests therein
  • that registration confers indefeasibility of title
  • that it is not necessary for a person intending to deal with the land to investigate the history of a registered proprietor’s title and
  • that the title is guaranteed by the government, such that should a person be deprived of an interest in land, he or she will be paid monetary compensation.

The system is named after its creator, Robert Torrens, who introduced it in South Australia in 1858.

Values

  • Site value – the value of the land including site improvements (such as levelling, retaining walls and clearing of timber) but excluding structural improvement.
  • Capital value – the value of the land including all improvements permanently attached to the ground (such as buildings and sheds). The Capital value is used by Rating Authorities as the basis for the levying of rates, taxes and other imposts. The value is determined annually and based on the analysis of market evidence.
  • Notional value – concessional property valuations that protect existing uses where there is pressure to alter the use away from the current use or the current zoning allows for a more valuable use. The notional value will disregard any potential enhancements to value including existing land divisions. The lower notional value will be used by rating authorities to provide rate relief to the owners. Refer to the Valuation of Land Act 1971 Section 22A and 22B.

Variable Rate Loan

The rate charged on a variable loan moves up or down in accordance with movements in interest rates, as set by the Reserve Bank. Basic variable loans generally have fewer loan features than a standard variable loan.

Zone Code

A code used to signify how a property or area has been zoned. Zones exist for development and planning purposes and signify what use or uses a given property (or properties within an area) may be put to – e.g. residential, commercial. Further detail is available from Planning SA, South Australia Development Plans.