Glossary C-D


This is the value of assets such as a business, property, house etc.

Capitalising Interest
When interest payable is accrued and added to the total debt payable rather than being paid as it is charged.

Capital Gain
When an asset is sold for more than its original price, this is the monetary gain.

Capital Gains Tax
This is a federal tax payable on profits made from the sale of a variety of assets (including investment properties). Assets purchased prior to 1985 are exempt. Your principal place of residence (where you live), providing it has never been rented out or used for business purposes, is also exempt.

Capped Rate Loan
A loan where the interest rate is guaranteed not to rise above a certain percent (the cap), but may fall in the event of a rate drop. The capped rate period is normally 6 or 12 months.

A form of a contract clause lodged on land or property title that denotes that another party who is not the owner, has claimed some rights or interest on that property.

Caveat Emptor
This is a Latin word meaning “Let the buyer beware”. Under this doctrine it was hard for the buyer to recover from the seller for defects on the property.

Certificate of Title
A document showing amongst other things the ownership of a property and whether there are any mortgages on it.

This relates to the frequency at which interest is added to the loan balance and can differ from the frequency at which it is calculated. On some loans, interest is calculated daily but charged monthly.

These are items of personal property such as appliances and clothing. In real estate terms chattels are movable items included in the sale of a property such as furniture.

Means Comparative Market Analysis. Real estate agents are required to provide this when pricing a property. They are required to compare like sales of at least three properties of the same standard or condition, sold within a five kilometre radius in the last six months. If the CMA is not provided then the agent should provide a written substantiation of the advice.

Combination Loans
See Split Loans

Payment for selling a product. Real Estate agents receive a commission from the vendor when they sell a property, while Mortgage Brokers receive a commission from a lender when they sell a home loan product.

Common Property
Areas that do not belong to an individual and are subject to use by many. It is owned by the tenants in common.

Company Title
Company title and strata title are forms of title applicable to home units and apartments. Under company title, a private company owns the land and buildings. The buyer purchases shares in the company that entitles them to exclusive possession of a particular unit or apartment in the block.

Comparison Rate
Comparison rates are similar to interest rates, but give the consumer a better indication of the true cost of a loan. Comparison rates take into account not only the interest rate for the loan, but also other fees and charges incurred during the life of the loan, such as ongoing monthly account fees and application fees. For example, a loan may be advertised with an interest rate of 6.3% and a comparison rate of 7.6%. Note that not all fees and charges are included in comparison rates (i.e. stamp duty is not included, and fees that are only incurred in certain circumstances such as redraw fees are not included).

Construction Loan
A loan that caters to people building or renovating. The loan amount is generally drawn down progressively as various stages of construction are completed and builder’s invoices are received. A valuation of the work may be required at each draw down stage.

Consumer Credit Code
Also known as the Uniform Consumer Credit Code (UCCC) is the legislation that regulates credit provided to personal customers and strata corporations that is intended wholly or predominantly for personal or household use.

Any legally enforceable agreement existing between individuals or other entities.

Contract of Sale
The agreement between the vendor and the buyer outlining the terms and conditions for the sale of a property. The contract will include the purchase price and any conditions such as “subject to building inspection” and “subject to finance”.

The process generally undertaken by a solicitor or conveyancing specialist of transferring property ownership. Conveyancing costs including legal fees, title transfer fees and stamp duty all need to be considered when you are applying for a home loan.

This stands for Credit Ombudsman Service Limited. It is an independent dispute resolution scheme.

Formal or binding restrictions. If any of these are breached in a loan document, then it constitutes a default.

Cover Note
Temporary property insurance cover used to protect a property prior to taking out a formal insurance policy. Cover notes are often taken out while a property is under contract, and a formal policy taken out when the property settles.

This is money borrowed that needs to be paid back to the lender

Credit History
When you apply for a loan the lender will check your credit history, including any previous loans and credit cards you have applied for, any history of bad debt or bankruptcy etc. They may also ask other questions such as whether you have been in arrears on other loans or whether you have ever exceeded your credit card limit.

Credit Limit
The maximum amount a borrower can use at any time.

Credit Rating
Lenders take into account a person’s credit rating when assessing a loan application. Credit ratings are provided by a specialist agency that examines a person’s financial history and whether debt obligations are met. The top rank is AAA, the bottom is a D.

Credit Union
Type of a lending institutions originating from co-operative groups sharing a common bond. They offer savings and loans accounts.

A party to whom money is owed.

Certificate of Title

Daily Interest
Interested calculated on a daily basis.

An entry to charge a withdrawal to a specified account

A person who owes money to another. In financial terms it is the party who has obtained money from a lender. Also known as the borrower.

A legal document stating an agreement or obligation relating to a property.

This is the failure of a borrower to meet the conditions of a mortgage agreement (usually the inability to meet the minimum loan repayments). If the borrower defaults on their loan, the lender may take possession of the property and sell it to cover the outstanding loan amount.

Default Rate
The rate a loan rolls/moves automatically at the end of any fixed period.

Deferred Establishment Fee
This is an establishment fee that is only payable when a loan is repaid within the first few years (typically 3 to 5 years) of the loan period.

A deposit is usually required when you are taking out a home loan. Generally a minimum deposit of 20% is required, or if mortgage insurance is taken out you may only need a 5% deposit. Some lenders offer no deposit home loans if you have proven cash flow, although these products may come at a higher interest rate.

When a mortgage has been repaid in full. The borrower will receive a discharge document from the lender stating that the mortgage has been repaid.

Discharge Fee
A fee charged by the lender to cover the administration costs of finalising and discharging a mortgage.

Discount Rate
A reduced interest rate offered usually for the first year of the loan, after which the loan will revert to a standard rate. Also known as an introductory rate.

Disposable Income
Any money left over after all expenses have been paid (e.g. mortgage repayments, bills and so on)

A share of profits that is paid by a publicly listed company to a shareholder. Dividends are one of the income sources you will be asked about when applying for a home loan.

Discharged Mortgage

Draw Down
To access available loan funds, especially referring to lines of credit where the limit is et and funds can be used as required.

Debt to Service Ratio. This is a figure that lenders use to determine your ability to repay your loan. Lenders use a variety of formulas to arrive at a DSR figure, but it is basically a percentage of your income that will be used to service all of your loan debts. As a general rule most lenders will allow a DSR of between 30% and 35%.