This is interest that is accumulated on a loan and is repaid at a later stage, rather than at the start of the loan repayments. Generally, accrued interest is settled at the time when the principal amount has been repaid. This type of interest may be calculated at a certain rate on the value of the loan, or it may be compounded, which means that interest is charged also on interest.
The term 'acquisition' describes the process of taking ownership of, or title to, a particular property or asset.
Also known as a variable-rate mortgage, this type of home loan has an interest rate that is adjusted in line with changes in the prime lending rate.
Agreement of sale
An agreement of sale, also referred to as a deed of sale, is a written contract stipulating the terms and conditions of a property sale, as negotiated and agreed on by both the seller and the buyer.
Amortisation refers to the process of repaying loans in regular instalments. During the initial years of the repayment process instalments primarily cover the cost of the interest owing on the loan. In later years loan repayments largely serve to cover the outstanding principal amount.
The instalments of a balloon mortgage have a fixed interest rate, and the loan is repaid over a set period. At the end of the loan term a lump-sum repayment is made to settle the principal amount due.]
Basis point refers to a one-hundredth of a percent. Generally, interest rate fluctuations are quoted in basis points.
A beneficiary is the person who receives the benefits of, for example, a trust or an estate as specified by a contract, for example a will.
A bond is the right to assets provided as security for an interest-accruing loan made to a property owner in order to facilitate the purchase. Bonds are registered at the Deeds Office against the property's title deed. The property is therefore the collateral for the loan's repayment.
Bond costs, which include conveyance fees, stamp duty and VAT or transfer duty, as the case may be, are paid by the prospective property owner to the transferring conveyancer when his or her bond is officially registered.
A broker is an individual or company that fulfils an intermediary role between a buyer and a seller.
Budget plans are additional credit facilities made available to credit cardholders. They enable cardholders to repay larger purchases over an agreed period of time, at a somewhat higher interest rate than normal.
A cap limits the amount by which the interest rate on an adjustable-rate mortgage can change in a year, or during the course of the loan's life.
Capital gains tax
Capital gains tax is the tax that individuals, trusts, companies and corporations pay on the profit they make from selling capital assets or property.
Cession is the transfer of a personal right from one party (the cedent) to another (the cessionary).
A commodity is any item of trade or commerce that can be processed and sold for commercial gain.
Comprehensive vehicle insurance
This is a type of broad car insurance that will pay out the current market value of a vehicle in the case of theft, fire or an accident. It will also cover the repair costs of any other vehicles involved in an accident.
According to the terms of a conditional sale, a buyer moves onto a property and repays the mortgage in instalments, but the title of the property belongs to the seller until the loan has been settled in full.
Credit bureaus investigate individuals' credit histories, and compile the findings in a credit report. These credit reports are then used by lending institutions to determine the creditworthiness of people who apply for credit. A decision on whether or not to grant the loan is, inter alia, based on this report.
A debenture is an official certificate that indicates outstanding debt. A company or corporation hereby acknowledges this debt and its interest, which must be paid in regular intervals until all the outstanding money has been repaid.
A debt-to-income ratio indicates what percentage of an individual's gross monthly income is spent on repaying loans. This ratio is used to calculate how much debt (or more debt) a consumer can afford to take on.
Deed of sale
A deed of sale, also referred to as an agreement of sale, is a written contract stipulating the terms and conditions of a property sale, as negotiated and agreed on by both the seller and the buyer.
The Deeds Office is a governmental department responsible for registering transfers of immovable property.
A default occurs when one or more party fails to honour the terms of a particular agreement.
Depreciation refers to a gradual decrease in the value of an asset, such as a vehicle.
Also known as a deposit, a downpayment is a sum of money paid by a buyer out of his or her own pocket when purchasing an asset. The downpayment amount is the difference between the purchase price and the percentage of this price that is financed by a loan. Sometimes a minimum deposit amount is required by financiers.
Earnest money, more commonly known as a deposit, is a predetermined amount of money that a person puts down when submitting a formal offer to buy a property.
Economy refers to the management of resources belonging to a business, community or country. It may be thought of as a system of production, supply and consumption.
Electronic banking refers to methods of banking that do not require accountholders to visit a physical branch of the bank. Electronic banking options include using the internet, a telephone, a cellphone, or an ATM.
Equity refers to the difference between a property's market value and the outstanding mortgage repayments due on the property. In other words, it is the amount by which the value of a bonded property exceeds the sum still payable on the mortgage.
Escrow is the percentage of a homeowner's monthly loan instalment that is retained by the lender to pay bond insurance, taxes and other fees associated with the property. Escrow payments may also be referred to as 'reserves'.
An estate is the financial or physical property owned by a living person. The estate is passed on to beneficiaries when this person dies.
A fiduciary is someone who assumes the obligation to manage, for example, a company or assets with the appropriate diligence, skill and care
Fixed interest rate
A fixed interest rate means that the interest rate will remain unchanged for the duration of the loan agreement. The interest rate will therefore not be affected by market rate fluctuations.
Fluctuating payments come into play where a variable interest rate applies. In effect, payment instalments are recalculated every time the interest rate changes.
Foreclosure is a legal action that occurs when a borrower defaults on loan repayments. All of the borrower's rights to a property are terminated by the lender. The lender then recovers the amount outstanding on the loan by selling the property at a public auction.
Freehold ownership occurs when an individual owns both the property and the piece of land on which the property is built.
Garage credit card
A garage credit card offers cardholders credit facilities that can be used to pay for petrol and various other vehicle-related expenses.
Goodwill refers to 'intangible assets' such as a good location, business reputation, or exclusive trading rights.
Grace period refers to the period of time during which a loan instalment may be settled, after its due date, without the borrower incurring penalties for late payment.
Gross profit is calculated by subtracting total cost from total sales. Essentially, it is the 'pure profit' of a business.
A guarantee is a financially binding document drawn up to ensure that a particular institution (the guarantor) fulfils its obligations as stipulated in a contractual agreement. It usually guarantees that a certain amount of money will be paid on the condition that a certain event occurs. Examples are tender guarantees, advance-payment guarantees and facility guarantees.
Guaranteed option to purchase
This is a clause in a vehicle lease agreement that entitles the leaseholder to purchase a vehicle once the term of the lease has expired. Usually, the price of the vehicle is agreed on as part of the contract.
Handling fees are charged to clients, usually by banks, for processing the paperwork involved in a particular transaction.
Harmonised System Product Code (HS Code)
The Harmonised System Product Code, or HS Code, is the international system whereby goods are classified according to standards for customs processes.
Hedging refers to measures that individuals or other entities take to protect themselves from risk. Essentially, 'hedging' minimises business risk without minimising investment profits too drastically.
Hire purchase refers to a legal agreement whereby an individual hires goods for a specified period and for a set price that is paid in instalments. If all the instalments are settled during the stipulated term, the goods become the individual's property.
Home loan application
A home loan application is a document containing relevant information about a person applying for a loan.
The instalment amount is the basic monthly sum payable on a loan, excluding any insurance or assurance premiums that may apply.
Institutional investors, also referred to as professional investors, only engage the market on behalf of their members. Some examples of institutional investors are banks and pension funds.
Insurance is a service that promises reimbursement in the case of loss or damage to assets. Individuals or companies concerned about potential hazards will make payments towards an insurance policy (usually in monthly premiums), which will then pay out in the event of loss or damage.
Essentially, interest is how much it costs to use money that is not your own. For example, if a person borrows money from the bank, he/she needs to pay for this service by means of interest, which is calculated on the size of his/her original loan. On the other hand, the bank pays interest to people who deposit money at the bank.
The interest rate is the method of determining exactly how much it costs to borrow money from a lending institution such as a bank. For example, if the interest rate is 5%, it means that the lender must pay the bank 5% of the original loan amount.
This is an electronic banking facility that allows clients to complete financial and banking transactions online.
JET stands for Johannesburg Equities Trading system. This trading system, managed by the JSE, automatically matches, buys and sells orders of JSE member companies.
JSE is short for Johannesburg Securities Exchange.
JSE member firm
A JSE member firm is a company that is registered with the JSE, and is therefore permitted to trade as a principal or agent in any transaction.
The JIBAR, Johannesburg Interbank Agreed Rate, is the money market rate that is used in South Africa. JIBAR is calculated as an average of the respective rates of various local and international banking institutions.
Joint liability refers to a legal obligation or debt, the fulfilment or repayment of which is the responsibility of two or more individuals, with each being liable for his/her pro rata share of the entire obligation or debt.
Latent defects are flaws or faults in a property, such as cracks, damp, rot or subsidence, that are hidden from view on initial inspection of a property or are not picked up when a property is inspected prior to purchase.
A lease is an agreement between a property owner and a tenant. It stipulates the conditions for property rental, and includes details such as maintenance obligations, the monthly rental rate and the deposit payable. Lease agreements are usually effective for one year, with a mutual notice period of usually approximately one or two calendar months.
A lease can also be used when an individual finances the purchase of a vehicle by leasing it instead of buying it. In this scenario the owner of the vehicle (known as the lessor) permits the use of the vehicle by a lessee for a specified period of time. During this period the lessee retains the vehicle and pays a rental fee for its use. At the end of the lease term the lessee must extend the lease period or, alternatively, purchase the vehicle. The lessee also has the option of purchasing the vehicle before the end of the lease, in which case the contract will be terminated early.
A levy is a fee payable by property tenants in a sectional title scheme as contribution to the upkeep of common areas such as gardens and quads, as well as other communal facilities. Levies are proportionately calculated, ie the bigger your sectional title property, the higher your levy would be in relation to that of your neighbours.
Liability refers to the legal obligation or debt of one party towards another party.
Life cover is a form of insurance taken against the life of the policyholder to ensure that his or her financial obligations can be met. Beyond such obligations, life cover is often taken out by people with young dependants. As the policyholder gets older, the cost of life cover generally increases, making this a financial solution best suited to young adults or parents.
Line of credit
Line of credit is an agreement between a lender and a borrower, stipulating the maximum sum of credit a borrower may have access to. This agreement also clarifies various conditions, such as when the money must be repaid, and how (e.g. in monthly instalments).
Loan to value
Loan to value, also referred to as the loan-to-value ratio of property, refers to the ratio between the home loan amount required to buy a property and the market value of the property as estimated by the bank or lending institution that grants the loan.
A lock-in is a written agreement that guarantees a homebuyer a specific interest rate, on condition that the loan is formalised within a set period.
Market value refers to the price for which a property can be sold, as mutually agreed on by the buyer and the seller.
MasterCard is a credit card association and globally accepted credit card brand.
Minimum due (repayment)
Minimum due (also referred to as 'repayment') is the minimum amount of money that a credit cardholder must pay towards his or her credit card expenditure on or before the date specified on his or her credit card statement.
Home loans and vehicle loans are usually repaid in regular monthly instalments, usually via debit order, to a lending institution. These monthly repayments include the principal amount as well as the interest. During the initial years of the loan the repayments are applied primarily towards interest costs. During the later years of the loan instalment amounts generally cover the outstanding principal amount. Depending on the type of home or vehicle loan you have, your monthly instalments could be affected by interest rate fluctuations. Furthermore, any changes in the principal amount of your loan may affect your repayments.
In South Africa lending institutions generally do not grant loans where the monthly instalment amount exceeds 30 percent of single or joint gross monthly household income.
A mortgage bond is the right to assets given as security for a loan by a prospective homeowner to a lender, whereby the homebuyer is issued enough money to buy a specific property. This agreement is structured over a specific period – usually 20 or 30 years – and usually entails monthly repayments of the debt, at an interest rate that is either flexible or fixed.
A mortgage broker is a company or individual who organises financing for borrowers.
Nasdaq Stock Market
Listing more than 5 000 companies, the Nasdaq Stock Market consists of two independent markets – the Nasdaq Smallcap Market for up-and-coming businesses, and the Nasdaq National Market for large, influential businesses. It is the world's first electronic stock market.
The net assets of businesses or individuals are determined when both current and long-term liabilities are subtracted from total assets.
Net asset value (NAV)
Net asset value is the total worth of a particular fund's investments. In the case of mutual funds, NAV per share normally corresponds to the fund's market price, whereas the market price can fluctuate considerably with closed-end funds. .
National Home Builders Registration Council
The National Home Builders Registration Council (NHBRC) is a regulatory body created to protect the interests of homebuyers and to regulate property developers and builders in terms of their trade. One of this organisation's core functions is to enforce a quality benchmark in terms of building and craftsmanship, and to hold developers and builders accountable for the housing that consumers buy from them.
In terms of home loans and related contracts, occupation generally refers to the specific date on which a new owner is legally entitled to move into his or her new property. Transfer, on the other hand, refers to the point at which the ownership moves from the seller to the buyer.
If a property buyer wishes to move into a new property before transfer has taken place, he or she will be required to pay occupational rent. The seller and the buyer need to agree on a suitable occupational rent. This is generally calculated as a pro rata amount of a full month's rent.
Offer to purchase
Once prospective homebuyers have found their dream house, the next step towards buying it is to submit an offer to purchase to the seller. An offer to purchase is a formal document, usually prepared by an estate agent. It contains the offered purchase price, as well as the conditions of sale (offer subject to sale of existing property, bond approval, etc).
If the prospective buyer and the seller agree on these conditions, the offer to purchase will serve as the foundation for a legally binding agreement of sale.
An oligopoly refers to a market with a few powerful players who often collaborate to influence both the supply of a product as well as its market price.
A flexible arrangement whereby credit grows as purchases are made or cash is advanced.
An open-end lease is a special lease agreement that allows an extra deposit to be made when the agreement expires – this caters for possible fluctuations in the value of the property.
An open-end mortgage is a type of mortgage against which further debt can be extended.
An overdraft is a loan, or a 'line of credit', extended to a personal accountholder by a bank. Overdrafts are revolving loans, which means that you can access your line of credit at any time without having to apply for a loan each time. Provided that you repay your loan amounts and interest calculated on your outstanding balances regularly, this loan agreement can go on indefinitely, giving you financial flexibility.
A parallel loan, also known as a back-to-back loan, allows a business in one country to borrow currency from a business in another country for a certain period, and vice versa. The businesses then agree to return each other's currency at a specific time. This reduces the risks of foreign exchange dramatically..
A payslip is one of the documents that banks may require before issuing you with a personal loan, home loan, credit card or other line of credit. This document, issued on a monthly basis by your employer, serves to prove that you have a fixed monthly income, and that you'll be able to afford repaying any line of credit or loan made available to you.
Pension is the monthly income stream that helps support retired senior citizens who contributed to a pension fund during their working lives.
Debit cards, as well as some credit cards, are issued with a PIN for safer point-of-sale transacting and ATM-based banking. Once the vendor has swiped your card, you will be prompted to enter your PIN. Keeping one's PIN safe is critical to prevent transactional fraud. The PIN should preferably be memorised, but if this is not possible, it should never be kept in the same place as the debit card.
The qualification period is a period after a new insurance policy has been taken out during which the insurance company will not allow any claims to be made by the policyholder. The insurance firm uses this time to assess the accuracy and validity of the application.
Qualifying stock option
Some companies offer a qualifying stock option, whereby its employees can buy shares at a significantly discounted rate.
This is an examination of a company's qualities, such as staff morale or managerial style, which cannot be calculated scientifically or mathematically.
In contrast to qualitative research, quantitative research is a mathematical examination of a company's figures, such as total asset value or future sales.
Quid pro quo
Quid pro quo is, for example, an understanding whereby one company can use the research of another company free of charge, provided the first company does all its business with the second.
According to the random walk hypothesis, stock price fluctuations are always by chance and unpredictable. One change occurs in isolation from the next, and it is thus impossible to detect a pattern or formulate a theory to beat the stock market consistently.
A rate lock is an arrangement between a homeowner and his or her home loan provider, where a fixed interest rate is agreed on for a certain amount of time. Rate lock normally applies to a 60-day period.
A financed asset, such as a vehicle or property, can be repossessed by a lending institution if the person who bought it does not honour the purchase agreement by making monthly repayments on time.
Reverse-annuity mortgages (RAM)
A reverse-annuity mortgage is the bank loan equivalent of a negotiated percentage of a property's market value. The homeowner receives the loan as an annuity.
Sectional title ownership entails owning a section of the property, rather than the entire property. Flats, apartments and certain types of clustered residential properties are generally classified as sectional title properties.
This is a bond that is secured by the assurance of collateral such as a mortgage bond. In contrast, unsecured bonds, also known as debentures, do not require any form of collateral from the loan applicant.
Sell to rent back
Sell to rent back is an arrangement that allows a homeowner to sell his or her property to a bank or property investment company and then rent it back from the institution to continue living there.
Shareholders' equity, also known as a company's net worth, is calculated by subtracting the total liabilities from the total assets. [CHECK WITH CREDIT]
When a property is marketed by an estate agent, a 'sole mandate' implies that one particular estate agency is granted the sole right and responsibility to market the property for a certain period.
In return for the sole mandate the estate agent will take additional steps in marketing the property, including placing feature advertisements in the local press, property magazines, etc. According to most credible estate agencies, a sole mandate substantially increases the closing rate on property sales.
A sole proprietorship is a business that is owned by one person. Even though he or she does not have to pay corporate income tax, the person's liability in terms of business debts and obligations is unlimited.
The term 'takeover' refers to the transferral of control of a company from one set of shareholders to another set of shareholders. A takeover can either be hostile or take place through a friendly acquisition.
Tangible assets, also known as real assets, are valued in terms of specific physical properties. They can include both reproducible assets (such as machinery or buildings) and non-reproducible assets (property or works of art, for example).
When you purchase a property, the transfer of the title deed to your name serves as proof that you have become the rightful owner of the house, flat or land. To transfer the title deed to your name you will need to consult a property conveyancer. The property conveyancing function is often executed by a law firm specialising in property law.
Transfer fees are payable when purchasing a property. Essentially, this cost facilitates the administrative process of transferring the ownership rights of a property from the seller to the buyer.
The treasurer is the person in charge of planning and implementing a company's funding and investment activities.
'Uncleared funds' are money that has been deposited into a bank account and is reflecting in the balance, yet has not been cleared by the bank. This holding period is imposed to prevent cheque fraud.
A business is 'undercapitalised' when it does not have enough money to function normally.
Underfunded pension plan
This is a pension plan with a negative surplus – there are more liabilities than assets.
A stock price is 'undervalued' if it is too cheap according to a specific valuation model. If a business's price/earnings ratio is significantly lower than average in a particular sector, the stock price can be considered cheap or 'undervalued'. It is essential to apply the correct valuation model
The process of establishing the value of a business's stock by taking both earnings and the market value of assets into account.
A value broker is a discount broker who keeps a certain percentage of every transaction's total value as his or her earnings.
This type of cost corresponds directly to the level of output. In other words, if nothing is produced, the variable cost will be zero.
Variable interest rate
A variable-interest-rate loan features an interest rate that is linked to the prime rate, ie when the prime interest rate is increased, the interest charged on the outstanding loan amount will also be increased. If the prime rate drops, the amount of interest charged on the loan will decrease accordingly.
In terms of South African taxation, value-added tax (VAT) is levied when goods or services are resold or provided at a profit in terms of the Value-Added Tax Act.
This happens when one business purchases or takes over another business in the same industry, but the two respective businesses are not involved in the same part of the production process.
Waiver of premium
This refers to a term in an insurance policy contract that stops insurance premiums either temporarily or permanently if the policyholder becomes incapacitated.
A weak market is characterised by many sellers, few buyers and decreasing prices.
A will is an official, legal document containing instructions as to how a person would like his or her estate to be distributed when he or she dies. A person will usually nominate an executor to handle the will. Many people opt to choose a relative, yet it is advisable that individuals with complex estates (ie multiple properties, bonds and other assets) nominate a professional executor, such as a broker or their financial or asset management institution.
This is a sudden profit that did not stem from any conscious effort by the profiting person.
This is when a homeowner takes out a second mortgage while the first is still in effect. The wraparound mortgage serves as collateral for the homeowner's total debt.
Zoning refers to the classification of land. Property can be zoned for residential, commercial or industrial development. Zoning dictates what kind of property can be developed in a particular area.
Nedbank Ltd Reg. No 1951/000009/06. Authorised financial services and registered credit provider (NCRCP16).