Glossary

An alt-doc or low-doc loan is assessed using alternative evidence of income, such as business activity statements or an accountant's letter, instead of full tax returns.

Anti-money laundering and know-your-customer checks are identity and source-of-funds checks that lenders and other reporting entities carry out under Australian law to prevent financial crime..

The as-if-complete value is a valuer's opinion of what a property will be worth once planned construction or renovation is finished, assessed at today's market conditions on the assumption the works are completed as specified..

The as-is value is the value of a property in its current state at the date of valuation, without allowing for any planned works, approvals or improvements that have not happened yet..

An Australian Credit Licence is issued by ASIC to businesses that engage in consumer credit activities, such as lending to individuals for personal, domestic or household purposes or arranging that credit.

AFCA is the external dispute resolution scheme for complaints about financial firms that are its members, including many lenders, brokers and credit providers.

A bare trust is a simple trust in which the trustee holds an asset for a beneficiary but has no active duties beyond holding title and following the beneficiary's directions.

Break costs are charges a lender may impose when a fixed-rate loan is repaid or changed before the fixed period ends.

A business purpose declaration is a statement signed by a borrower that a loan is for business or investment purposes.

Capitalised interest is added to the loan balance instead of being paid as it falls due.

The cash rate is the interest rate on unsecured overnight loans between banks.

A caveat is a notice lodged on a property's title that warns others a person claims an interest in the land.

Combined LVR adds every loan secured on a property, such as a first mortgage and a second mortgage or caveat loan, and compares the total with the property's value.

A contingency is an allowance in a project budget for costs that cannot be predicted precisely, such as ground conditions, design changes or price increases.

A corporate trustee is a company that acts as trustee of a trust, such as a family trust or SMSF.

Cost to complete is the amount still needed to finish a construction project at a given point, including remaining building costs, consultants, contingency and finance costs.

Cross-collateralisation is when several properties secure several loans together, so each property stands as security for all the debts, not just the loan used to buy it.

A cross-default clause makes a default under one loan or agreement a default under another.

Debt service cover ratio divides net operating income by total debt service, which is interest plus scheduled principal repayments.

A deed of priority is an agreement between lenders who hold security over the same property.

Default interest is a higher interest rate that applies when a borrower is in default, such as after a missed payment or when a loan is not repaid at maturity.

A default notice is a formal notice from a lender stating that the borrower is in default and what must be done to remedy it.

The defects liability period is the time after practical completion during which the builder must return to fix defects in the work.

A development approval is a decision by a planning authority allowing a proposed use or building works on a site, usually with conditions.

A discretionary trust is a trust in which the trustee decides how income and capital are distributed among a group of beneficiaries.

A drawdown is a payment of funds from a loan facility.

End debt is the amount still owed after a bridging loan's exit event, usually once the existing property has sold and the net proceeds have been applied to the loan.

An equity contribution is the money or value a borrower puts into a purchase or project from their own resources.

An establishment fee is a one-off charge for setting up a loan.

Exchange of contracts is when the buyer and seller sign identical contracts and the deposit is paid, making the sale binding subject to any cooling-off rights and conditions.

An exit fee is a charge payable when a loan is repaid, either at maturity or early.

An exit strategy is the plan for repaying a loan at the end of its term, typically through the sale of a property, a refinance with another lender or a business cash event.

An extension fee is charged when a lender agrees to extend a loan beyond its original expiry date.

A feasibility study is a financial model of a development showing expected revenue, costs, finance and profit.

Financial hardship is when a borrower is unable to meet their repayments because of circumstances such as illness, job loss or a business downturn.

A first mortgage is a mortgage registered on a property's title that ranks ahead of every other mortgage.

Forced-sale value is a valuer's estimate of what a property might sell for under restricted marketing conditions, such as a shortened campaign following a lender enforcing its security.

The Foreign Investment Review Board advises the Treasurer on Australia's foreign investment framework.

A foreign purchaser surcharge is additional duty that some states and territories charge foreign persons buying residential land, on top of standard transfer duty.

A general security agreement is a security interest over a company's or individual's personal property, which can include equipment, receivables, stock and other assets that are not land.

A supply of a going concern is a sale of a business, including a leased commercial property, that can be GST-free if the conditions set by the ATO are met, such as both parties being registered and agreeing in writing..

Gross realisation value is the total expected sale proceeds of a completed development, usually assessed by a valuer as the sum of the individual dwellings, lots or units if sold separately.

The margin scheme is a way of working out GST on the sale of real property, where GST is calculated on the margin between the sale price and the purchase price or a valuation, rather than on the full sale price.

An intercreditor deed governs the relationship between senior and subordinated lenders on the same project, usually a development.

Interest cover ratio measures how many times a property's net operating income covers the interest payable on a loan over the same period.

An interest-only loan requires payments of interest only for a set period, with no reduction in the amount borrowed.

Land tax is an annual state or territory tax on the value of land a person or entity owns, generally excluding the principal place of residence.

Landholder duty is a duty charged when someone acquires a significant interest in a company or unit trust that holds land above a threshold.

A lapsing notice is a process available in some states that requires a caveator to take court action to support a caveat within a set period, or the caveat lapses and is removed from the title.

A letter of offer is a lender's formal offer to provide a loan on stated terms and conditions.

An LRBA is the structure through which an SMSF can borrow to acquire a single asset.

A line fee is a charge on the total limit of a facility, rather than on the amount drawn.

Loan-to-cost compares a loan with the total cost of a project or purchase rather than the property's value.

The loan-to-value ratio compares the amount borrowed with the value of the property securing it, expressed as a percentage.

Mezzanine debt is a loan that ranks behind senior debt but ahead of equity.

The mortgagee is the lender that holds a mortgage over a property as security for a loan.

A mortgagee in possession is a lender that has taken control of a mortgaged property after a default, usually so it can sell the property to recover the debt.

The mortgagor is the owner of the property who grants a mortgage over it to secure a loan.

The National Credit Code is part of the National Consumer Credit Protection Act and sets rules for regulated consumer credit contracts, including disclosure, hardship variations and enforcement procedures..

Net operating income is a property's income after deducting the operating costs the owner bears, such as unrecovered outgoings, management and repairs, but before interest, tax and depreciation.

A non-bank lender provides loans but is not an authorised deposit-taking institution, so it funds its lending from sources such as wholesale markets, securitisation or investor funds rather than customer deposits..

A panel valuer is a valuation firm a lender has accepted onto its list of firms whose reports it will rely on.

Peak debt is the highest amount owed at any point during a loan.

A personal guarantee is a promise by an individual, often a company director, to pay a borrower's debt if the borrower does not.

The PPSR is the national online register of security interests in personal property, meaning property other than land and buildings.

Practical completion is the point at which building works are complete except for minor defects that do not prevent the property being used for its intended purpose, as defined in the building contract..

Pre-sales are contracts to sell dwellings in a development before construction is complete, usually with a deposit paid.

Preferred equity is an investment in a project entity that ranks behind all debt but ahead of the developer's ordinary equity.

Prepaid or retained interest is interest for some or all of the term that the lender deducts from the loan at settlement.

A principal-and-interest loan requires regular repayments that cover the interest charged plus part of the amount borrowed, so the balance falls over time and the loan is repaid by the end of the term..

Private credit refers to lending by non-bank entities, often funds that pool investor money, rather than by banks.

A private lender is an individual, company or fund that lends money, usually secured by property, outside the banking system.

A progress claim is a builder's request for payment for work completed at a stage of construction, as set out in the building contract.

A quantity surveyor is a construction cost professional.

A regulated loan is credit provided to an individual or strata corporation wholly or predominantly for personal, domestic or household purposes, or to buy or improve residential investment property, where the lender charges for credit.

Rental yield is a property's annual rent expressed as a percentage of its price or value.

Residual land value is the most a developer could pay for a site while still achieving a target profit, calculated by subtracting all other development costs and the target profit from expected revenue..

Responsible lending obligations require licensed lenders and brokers to make reasonable inquiries, verify a consumer's financial situation and assess that a regulated loan is not unsuitable before providing or arranging it..

A second mortgage is registered on a property that already has a first mortgage.

Security property is the real estate a lender takes a mortgage or caveat over to secure a loan.

A self-managed super fund is a private superannuation fund run by its members, who act as trustees or directors of the corporate trustee.

Senior debt is the loan that ranks first for repayment, usually secured by a first mortgage.

Serviced interest is paid regularly, usually monthly, from the borrower's own funds or income during the loan term.

Settlement is the completion of a property transaction or loan, when funds change hands, documents are exchanged and the transfer or mortgage is lodged for registration.

Step-in rights allow a funder or other party to take over the management of a project or contract if specified events occur, such as a default or the builder failing to perform.

Subordination is an arrangement in which one creditor agrees that its claim ranks behind another's.

A term sheet is a summary of the main terms a lender proposes for a loan, including the amount, term, interest, fees, security and conditions.

Transfer duty is a state or territory tax payable on the transfer of land and some other property, usually by the buyer.

A valuation is a formal opinion of a property's value prepared by a qualified valuer, usually commissioned by the lender for lending purposes.

WALE is the average remaining lease term across a property's tenants, weighted by the rent or area each tenant occupies.

Zoning is the classification a local planning scheme gives land, controlling what it can be used for and what can be built.