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.
BTerms starting with B
- Break Cost
- A fee charged when you exit a fixed rate loan early — it compensates the lender for the interest it expected to earn over the remaining fixed term.
- Bridging Loan
- A short-term loan that covers the gap when you buy a new home before selling your existing one.
CTerms starting with C
- Capital Growth
- The increase in a property's market value over time, separate from any rental income it produces.
- Cash Rate
- The Reserve Bank of Australia's official interest rate. It influences, but does not directly set, the variable rates lenders charge.
- Comparison Rate
- A rate that combines the interest rate with most fees and charges into a single figure, making it easier to compare loans.
- Comprehensive Credit Reporting (CCR)
- The Australian system where lenders report 24 months of repayment history — so both good and missed payments show on your credit file.
- Construction Loan
- A loan drawn down in stages as a home is built, with interest charged only on the amount drawn at each stage.
- Conveyancing
- The legal process of transferring property ownership from the seller to the buyer, usually handled by a conveyancer or solicitor.
- Cooling-Off Period
- A short window after signing a private-sale contract in which a buyer can withdraw, usually for a small penalty. It does not apply at auction.
- Credit Conduct
- How you have actually managed your repayments and accounts — the pattern of payments, arrears and defaults on your credit file, as distinct from a single credit score.
- Credit Score
- A number (typically 0–1,200) that credit bureaus calculate from your credit file to summarise your credit risk to a lender.
- Cross-Collateralisation
- Using more than one property as security for the same loan or set of loans. It can simplify borrowing but reduces flexibility when you sell.
DTerms starting with D
- Debt Consolidation
- Rolling higher-rate debts such as credit cards or personal loans into your home loan to reduce total repayments — usually at the cost of a longer term.
- Debt-to-Income Ratio (DTI)
- Your total debts divided by your gross annual income. Many lenders apply extra scrutiny above a DTI of six.
- Deposit
- The upfront portion of a property's price you pay yourself, with the remainder funded by your home loan.
- Deposit Bond
- A guarantee that substitutes for a cash deposit at exchange, with the full amount paid at settlement.
- Discharge Fee
- A fee charged by your outgoing lender to release the mortgage when you refinance or sell.
ETerms starting with E
- Equity
- The difference between your property's market value and the amount you still owe on your loan.
FTerms starting with F
- First Home Guarantee
- A federal scheme that lets eligible first home buyers purchase with as little as a 5% deposit without paying LMI, subject to property price caps.
- Fixed Rate
- An interest rate locked in for a set period, so your repayments stay the same regardless of market movements.
GTerms starting with G
- 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.
ITerms starting with I
- 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.
LTerms starting with L
- Land Tax
- An annual state tax on the value of land you own above a threshold. Your principal home is generally exempt; investment properties usually are not.
- 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.
- Line of Credit
- A revolving loan secured against your property that you can draw on up to an approved limit, paying interest only on what you use.
- Loan Portability
- A feature that lets you keep your existing loan when you sell one property and buy another, avoiding a full refinance.
- 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.
- Low-Doc Loan
- A loan for self-employed borrowers assessed on alternative income evidence such as BAS statements or an accountant's declaration rather than full tax returns.
MTerms starting with M
- Mortgage Registration Fee
- A state government fee to register the lender's mortgage against the property title.
NTerms starting with N
- Negative Gearing
- When an investment property's costs exceed its rental income, producing a loss that can generally be offset against your other taxable income.
- Non-Bank Lender
- A lender that is not an authorised deposit-taking institution. Many assess credit conduct and the story behind it rather than relying on a credit score alone.
OTerms starting with O
- 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.
PTerms starting with P
- Positive Gearing
- When an investment property's rental income exceeds its costs, producing taxable surplus income.
- 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.
RTerms starting with R
- Rate Lock
- A fee-based option that holds a quoted fixed rate for a set period between application and settlement.
- 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.
- Rental Yield
- Annual rent as a percentage of a property's value. Gross yield ignores costs; net yield subtracts expenses such as rates, insurance and management fees.
- Rentvesting
- Renting where you want to live while buying an investment property somewhere more affordable.
STerms starting with S
- Serviceability
- A lender's assessment of your ability to comfortably afford loan repayments, based on your income, expenses and debts.
- Serviceability Buffer
- An additional margin (commonly 3%) that lenders add to the actual rate when testing whether you can afford a loan if rates rise.
- 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.
UTerms starting with U
- Usable Equity
- The portion of your equity a lender will normally release — typically 80% of the property's value less your current loan balance.
VTerms starting with V
- Variable Rate
- An interest rate that can move up or down over time in line with the market and lender decisions.
- Vendor
- The person or entity selling a property.
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