Home Loan Glossary
Approval in Principle (Pre Approval)
The mobile banker is able to provide you with an estimate on your borrowing capacity based on limited information prior to finding a property and submitting a completed application.
Comparison Rate
The comparison rate takes into account all the fees and charges in relation to a loan over a 25 year term on $150,000. It is and industry requirement that assists you in understanding the costs associated with home loans.
Conveyancer
A legal representative that acts on your behalf to review the contract for sale and other property related legal matters.
Equity
Defines the ownership that you have in a property. It is the difference between the property value and the debt on your property.
Establishment Fee
Is a fee that needs to be paid at the start of a home loan. Not all home loans have establishment fees.
First Home Owner Grant
This is a government sponsored grant that is aimed at assisting first home buyers enter the property market. For more details view our information page for first home buyers.
Fixed Interest Rate
This is an interest rate that is set at a rate over a specific period. For more details view our information page on fixed interest rates.
Honeymoon Rate (Introductory Rate)
This is a variable product that has a low interest rate at the start of the home loan. For more details view our information page on honeymoon rates.
Investment Loans
Loans tailored specifically for property investment.
Lenders Mortgage Insurance (LMI)
This is insurance that covers the lender from defaults from the purchaser. LMI generally applies when the Loan to Value Ration is over 80%.
Line of Credit
A line of credit acts like a large credit card. You have the ability to drawdown on the credit up to a specified amount. For more details view our information page on line of credit.
Loan to Value Ratio (LVR)
The LVR is the loan value divided by the property value. For example a loan of $400,000 on a $500,000 property has an LVR of 80%.
Lo Documentation Loan (‘Lo Doc’)
This home loan does not require you to produce detailed financial documentation to the mobile banker. For more details view our information page on low documentation loans.
Mortgage
A loan that is secured by a creditor over the value of a property.
Offset Account Feature
An offset account is a linked bank account to a home loan. This is a valuable feature that allows you to reduce the interest payments on your home loan. Any funds deposited in your offset account ‘offsets’ the interest payment. For example $50,000 deposited in an offset account linked to a $400,000 home loan means you will only pay interest on $350,000. Often people link their wages to an offset account to reduce their interest payments.
Preapproval (Approval in Principle)
The mobile banker is able to provide you with an estimate on your borrowing capacity based on limited information prior to finding a property and submitting a completed application.
Principal
The outstanding amount owing on your home loan. Interest payable is calculated on your principle amount.
Redraw Feature
The redraw feature allows you to withdraw funds from you home loan if you have already made repayments.
Repayment Feature
The repayment feature allows you to pay down your home loan whenever you feel like it. It gives you more flexibility and the ability to close out the home loan faster.
Refinancing
Refinancing involves replacing your existing home loan with a new home loan. You can take advantage of savings by switching to a lender with a more competitive interest rate.
Settlement
Settlement occurs once the funds have been transferred for the purchase of the property.
Stamp Duty
Stamp duty is a government tax that you need to pay on the transfer of a property title. It is calculated as a percentage of the sale price.
Valuation
A valuation is complete by the lender or an independent party to determine the value of a property.
This guide is general information only and is not product advice. If you need advice on your circumstances you should seek professional financial advice.