Security and priority
First mortgage — the highest-ranking registered security over a property; repaid first.
Second mortgage — a mortgage ranking behind the first; repaid only after it.
Caveat — a notice on title claiming an interest, blocking dealings without the caveator's consent; not a mortgage.
Deed of priority — an agreement between secured parties setting the order and limits of repayment.
GSA — general security agreement over a company's personal property, registered on the PPSR.
PPSR — the Personal Property Securities Register, where non-land security interests are recorded.
Guarantee — a promise by a third party or director to pay if the borrower does not.
Cross-collateralisation — using multiple properties to secure a single facility.
Discharge — release of a mortgage or caveat from title on repayment.
Encumbrance — any registered interest affecting title.
Numbers and ratios
LVR — loan divided by security value, as a percentage.
Combined LVR — total of all debt against a property, divided by its value.
Exit LVR — the LVR at the end of the term, after capitalised interest and fees.
GRV — gross realisation value; projected total sales value of a completed development.
TDC — total development cost; all costs to complete a project.
LTC — loan to cost; loan divided by TDC.
ICR — interest cover ratio; income divided by interest expense.
Contingency — a cost buffer in a development budget, commonly 5%+ of construction.
Developer's margin — projected profit as a percentage of cost.
Total cost of funds — all interest and fees over the term, in dollars.
Interest and fees
Capitalised interest — interest added to the loan balance instead of paid monthly.
Prepaid or retained interest — interest for the term deducted from the advance at settlement.
Serviced interest — interest paid monthly from cash flow.
Default interest — a higher rate applying after a default event.
Establishment fee — an upfront fee for arranging and settling the facility.
Line fee — a periodic fee on the facility limit.
Exit or discharge fee — a fee payable on repayment.
Extension fee — a fee to extend the term.
Minimum interest period — a minimum interest amount payable even if you repay early.
Break cost — a cost of repaying a fixed facility before term.
Process and parties
Indicative terms — a non-binding outline of the proposed facility.
Conditions precedent — items that must be satisfied before funding.
Panel valuer — an independent valuer approved to value for the lender.
As is market value — current value of the property in its present state.
Quantity surveyor — a consultant certifying construction costs and progress.
Progressive drawdown — funding released in stages against certified progress.
Exit strategy — the evidenced event that repays the loan.
Business purpose declaration — the borrower's confirmation the loan is for business or investment purposes.
Wholesale investor — an investor meeting the Corporations Act tests, able to receive non-retail offers.
Arranger — the party that sources, underwrites, documents and administers the loan on behalf of investors.
Key points
- Priority on title decides who gets paid first.
- LVR, GRV, TDC and LTC size the loan.
- Interest may be serviced, prepaid or capitalised.
- Total cost of funds is the only fair comparison between lenders.
Frequently asked questions
What is the most important number in a private loan?
Exit LVR — the loan balance at the end of the term, including capitalised interest and fees, against the security value.
What is the difference between a caveat and a mortgage?
A mortgage is a registered security interest with a power of sale; a caveat only blocks dealings with the title and is a weaker position.
What does 'arranger' mean?
The party that sources, assesses, structures, documents and administers the loan on behalf of the investors funding it — Envision Private's role.