Mortgage glossary

Home loans come with a lot of jargon. Here's plain-English help with the terms you'll come across.

ATerms starting with A

Amortisation: The process of paying off a loan over time through regular repayments of principal and interest, so the balance gradually reduces to zero.
Appraisal / Valuation: A lender's assessment of a property's market value, used to confirm how much it will lend against the property.

Bridging Loan: A short-term loan that covers the gap when you buy a new home before selling your existing one.

Comparison Rate: A rate that combines the interest rate with most fees and charges into a single figure, making it easier to compare loans.
Conveyancing: The legal process of transferring property ownership from the seller to the buyer, usually handled by a conveyancer or solicitor.

Deposit: The upfront portion of a property's price you pay yourself, with the remainder funded by your home loan.

Equity: The difference between your property's market value and the amount you still owe on your loan.

Fixed Rate: An interest rate locked in for a set period, so your repayments stay the same regardless of market movements.

Genuine Savings: Funds you've accumulated or held over time (usually three months or more), which many lenders require to approve a loan with a small deposit.
Guarantor: A family member who uses their own property or savings as additional security to help you borrow, often to avoid LMI.

Interest-Only Loan: A loan where, for a set period, you only repay the interest and not the principal, resulting in lower repayments during that time.

Lenders Mortgage Insurance (LMI): A one-off premium that protects the lender (not you) if you default, typically required when borrowing more than 80% of the property value.
Loan-to-Value Ratio (LVR): Your loan amount expressed as a percentage of the property's value. A lower LVR generally means better rates and no LMI.

Offset Account: A transaction account linked to your loan whose balance reduces the amount of interest you're charged.
Ongoing Fees: Recurring charges such as monthly account-keeping or annual package fees that apply over the life of a loan.

Pre-Approval: A lender's conditional indication of how much it's willing to lend you, helping you shop and bid with confidence.
Principal: The original amount of money you borrow, separate from the interest charged on it.
Principal & Interest (P&I): A repayment type where each payment reduces both the loan balance and the interest owed.

Redraw Facility: A feature that lets you withdraw extra repayments you've made above your minimum, if you need the money back.
Refinancing: Replacing your existing home loan with a new one — often to get a lower rate, better features or to access equity.

Serviceability: A lender's assessment of your ability to comfortably afford loan repayments, based on your income, expenses and debts.
Settlement: The final stage of a property purchase when ownership legally transfers and your loan funds are paid to the seller.
Split Loan: A loan divided into fixed and variable portions, giving you the certainty of a fixed rate and the flexibility of a variable one.
Stamp Duty: A state government tax charged on property purchases, calculated on the property's value and varying by state.

Variable Rate: An interest rate that can move up or down over time in line with the market and lender decisions.

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