Glossary of useful terms and definitions
Australian Bankers' Association. The ABA is the national organisation of licensed banks in Australia.
The option to make higher repayments to pay off the loan faster.
To agree to the terms of an offer or contract.
Account keeping fees are charged to cover or partially cover the lender's internal costs of administering the account.
The amount of loan interest that has already occurred but not yet due for payment.
The process of allocating expenses (Council, rates, water rates) on settlement day that the seller has paid for but not used.
When a property is sold, the vendor (seller)
is normally entitled to all income (eg. rent) and is responsible for all
expenses (eg. council rates, water rates, etc) up until the date of
settlement, which normally takes place four to eight weeks after the
exchange of contracts. Settlement is the day on which you finalise
payment and take possession of the property.
The purchaser, meanwhile, is entitled to all income and is responsible for all expenses from the date of settlement onwards. Therefore, prior to settlement, the balance of the purchase price of the property
needs to be ‘adjusted’ to allow for expenses that have been paid in
advance or will be owing at the date of settlement.
Adjustment items typically include council rates, water rates and
strata levies – but may include other charges. Adjustments are
calculated by applying a daily rate to each of the relevant items, with
the balance of the purchase price adjusted depending on whether the
items are paid in advance or are unpaid at the date of settlement.
Let’s consider two examples of adjustments made to the purchase price of a property, based on a settlement date of 1 June.
Example: Council rates paid in advance
The vendor has paid the quarterly council rates of $455.00 for the
April – June quarter (ie. up to 30 June) so the purchaser owes the
vendor for 1 month of the quarterly bill.
To calculate the
adjustment, a daily rate must first be established. From 1 April to 30
June there are 91 days, which is equal to $5 per day ($455 / 91).
Therefore, the purchaser owes the vendor $150 (30 days x $5) for council
rates applicable to the month of June. The purchase price of the
property will therefore need to be increased by that amount.
If you’re buying a home and would like to know more about
adjustments, contact your legal representative. Your solicitor or
conveyancer is responsible for identifying and making adjustments prior
A person or body authorised to act on behalf of a client in the sale, purchase or management of property.
A block of land created out of a larger area.
The period of time one has to repay a loan at the arranged terms.
Fees charged to cover or partially cover the lender's costs of processing a loan application for an applicant.
The estimate of the value of a property being used as security for a loan.
An overdue amount yet to be paid.
Money, property or goods owned.
Money in a bank account that can be withdrawn immediately.
Automatic Teller Machine.
A public sale of property with ownership going to the highest bidder, subject to a reserve price being reached.
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