Glossary
Glossary
Obtaining a loan can sometimes be perplexing. To assist you, we've compiled a comprehensive glossary of terms to shed light on the process!
Glossary
Obtaining a loan can sometimes be perplexing. To assist you, we've compiled a comprehensive glossary of terms to shed light on the process!
Key Terms
Ijarah Muntahia Bittamleek (إِجَارَة مُنتَهِية بِالتَملِيك):
Definition: A lease-to-own contract. It starts as an Ijarah lease and ends with the lessee owning the asset, either by purchasing it at the end of the lease term or by receiving it as a gift.
Usage: Often used for home financing and other long-term asset acquisitions.
Ma'jūr (مَعْجُور):
Definition: A lease-to-own contract. It starts as an Ijarah lease and ends with the lessee owning the asset, either by purchasing it at the end of the lease term or by receiving it as a gift.
Usage: Often used for home financing and other long-term asset acquisitions.
Ijarah Wa Iqtina (إِجَارَة وَاِقْتِناء):
Definition: Similar to Ijarah Muntahia Bittamleek, it's a lease agreement with an option for the lessee to purchase the asset at the end of the lease term.
Usage: Commonly used for assets that depreciate over time, like vehicles.
Shariah (شريعة):
Definition: Islamic law derived from the Quran, Hadith (sayings and actions of Prophet Muhammad), Ijma (consensus), and Qiyas (analogy).
Usage: Provides the framework for all aspects of Muslim life, including finance.
Riba (ربا):
Definition: Interest or any unjustifiable increase in borrowed money. Prohibited in Islamic finance.
Usage: Traditional interest-based loans are not allowed.
Gharar (غرر):
Definition: Interest or any unjustifiable increase in borrowed money. Prohibited in Islamic finance.
Usage: Traditional interest-based loans are not allowed.
Principal:
Definition: The original amount borrowed or the remaining unpaid amount of a loan, excluding interest.
Usage: The primary amount on which interest is calculated.
Interest:
Definition: The cost of borrowing money, calculated as a percentage of the principal.
Usage: Paid by borrowers to lenders as compensation for the use of borrowed money.
Variable Rate Mortgage:
Definition: A mortgage with an interest rate that can change during the loan term based on market conditions.
Usage: Popular in Australia due to its flexibility and potential for lower rates.
Fixed Rate Mortgage:
Definition: A mortgage with an interest rate that remains constant for a set period, typically 1 to 5 years.
Usage: Provides certainty in repayments and protection against rising interest rates.
Comparison Rate:
Definition: A rate that includes both the interest rate and most fees and charges relating to a loan, expressed as a single percentage.
Usage: Helps consumers compare the true cost of different loans.
Loan-to-Value Ratio (LVR):
Definition: The amount of the loan compared to the value of the property, expressed as a percentage.
Usage: A higher LVR might require the borrower to purchase lenders mortgage insurance (LMI).
Lenders Mortgage Insurance (LMI):
Definition: Insurance that protects the lender in case the borrower defaults on the loan. Typically required for loans with a high LVR.
Usage: Often a one-off premium added to the loan amount.
Offset Account:
Definition: A savings or transaction account linked to a mortgage. The balance in this account offsets the loan balance, reducing interest.
Usage: Can result in significant interest savings over the life of the loan.
Redraw Facility:
Definition: Allows borrowers to withdraw any extra repayments they've made on their mortgage.
Usage: Provides flexibility for borrowers who've paid more than the minimum required.
Stamp Duty:
Definition: A state-based tax on property purchases, calculated based on the property's value.
Usage: One of the significant upfront costs when buying a home in Australia.
Questions or Concerns?
If you're still unclear about any terms or simply want to know more, feel free to contact us.
Get in Touch
Your financial literacy is our priority. Reach out for any clarifications or inquiries.
Burj is a specialised mortgage broking firm based in Hills District of Sydney. Helping homeowners and property investors grow their wealth faster.
Follow us
Infini Concepts Pty Ltd (ABN: 48 640 941 279) trades under ASIC Credit License: 556407
*All applications subject to assessment and lender approval
This site is not part of the Facebook website or Facebook Inc. Additionally, This site is NOT endorsed by Facebook in any way. FACEBOOK is a trademark of FACEBOOK, Inc.
Burj is a specialised mortgage broking firm based in Hills District of Sydney. Helping homeowners and property investors grow their wealth faster.
Follow us
Infini Concepts Pty Ltd (ABN: 48 640 941 279) trades under ASIC Credit License: 556407
*All applications subject to assessment and lender approval.
This site is not part of the Facebook website or Facebook Inc. Additionally, This site is NOT endorsed by Facebook in any way. FACEBOOK is a trademark of FACEBOOK, Inc.