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Amortisation: Amortisation refers to the gradual repayment of a loan over time through regular payments, which typically include both principal and interest. With each payment made, a portion goes towards reducing the loan's principal balance, while the remainder covers the accrued interest charges. As the loan term progresses, the proportion of each payment allocated to principal repayment increases, gradually reducing the outstanding balance. This process continues until the loan is fully repaid at the end of the loan term. Amortisation schedules outline the specific breakdown of principal and interest payments over the life of the loan, allowing borrowers to track their progress in repaying the debt.

Bank Valuation: A bank valuation, also known as a lender's valuation, is an assessment of the estimated market value of a property conducted by a professional valuer appointed by the lender. The bank valuation is used by the lender to determine the property's worth for the purpose of assessing the loan-to-value ratio (LVR) and determining the maximum loan amount they are willing to lend to a borrower. The bank valuation helps the lender evaluate the level of risk associated with the property as collateral for the loan. It's important to note that the bank valuation may differ from the purchase price or an independent valuation conducted by the borrower. Borrowers should be aware that the bank valuation can impact the loan amount they are eligible for and potentially affect the loan terms and conditions.

Borrower: The individual or entity that receives the home loan and is responsible for repaying it.

Break Fee: Also known as an Early Repayment Fee or Early Termination Fee, a break fee is a penalty charged by the lender when a borrower pays off or refinances their home loan before the agreed-upon term. This fee is designed to compensate the lender for the financial loss incurred due to the early repayment or termination of the loan. The break fee amount can vary and is typically calculated based on factors such as the remaining loan balance, the interest rate differential, and the remaining term of the loan. It is important for borrowers to carefully review the terms and conditions of their loan agreement to understand any potential break fees before considering early repayment or refinancing options.

Bridging loan: Short term loan that gives you six months to sell your existing property before moving into your new home.

Buffer Rate: A buffer rate, also known as a serviceability buffer, is an additional percentage applied by lenders to the interest rate when assessing a borrower's loan application. The buffer rate serves as a safety measure to account for potential interest rate increases or changes in the borrower's financial circumstances. It provides a cushion to ensure that borrowers can comfortably afford their loan repayments, even if interest rates rise in the future. The buffer rate is typically added on top of the actual interest rate to determine the borrower's ability to service the loan. The specific buffer rate can vary between lenders but is commonly set at around 2-3%. The buffer rate is intended to mitigate the risk of borrowers facing financial stress if interest rates were to increase. Borrowers should be aware of the buffer rate requirements when assessing their borrowing capacity and loan affordability.

Comparison Interest Rate: The calculated rate that helps borrowers compare the true cost of a loan, including both the interest rate and any upfront or ongoing fees. The comparison interest rate is expressed as an annual percentage rate (APR) and allows borrowers to compare different loan products on a more equal basis by considering all associated costs.

Construction loan: Loan that lets you pay off construction costs as funds are released in stages instead of all at once.

Equity: The difference between the appraised value of the property and the amount owed on the mortgage.

Equity Loan: An equity loan, also known as a home equity loan or a second mortgage, is a loan that allows homeowners to borrow against the equity they have built up in their property. The loan amount is determined by the difference between the property's current value and the amount still owed on the primary mortgage. Homeowners can use the funds from an equity loan for various purposes, such as home renovations, debt consolidation, or other financial needs. The loan is secured by the property, and interest is charged on the borrowed amount. It's important for borrowers to consider their financial circumstances and repayment ability before taking out an equity loan.

Equity Release: Equity release refers to a financial product that allows homeowners, typically those who are retired or approaching retirement age, to access the equity tied up in their property. It enables homeowners to convert a portion of their home's value into cash while retaining the right to live in the property. Equity release options include lifetime mortgages and home reversion plans. However, it's important for homeowners to carefully consider the potential long-term impacts and seek independent financial advice before proceeding with an equity release arrangement.

Fixed-Rate Loan: A home loan with an interest rate that remains unchanged for a specific period, providing predictable repayments.

Home Loan: A loan provided by a financial institution to finance the purchase of a residential property.

Honeymoon Rate: A promotional interest rate offered by some lenders as an incentive to attract borrowers into an introductory loan. It is typically a discounted interest rate that is lower than the standard variable rate for an initial period, usually six to twelve months. After the honeymoon period ends, the interest rate usually reverts to the lender's standard variable rate. Borrowers should carefully consider the long-term affordability of the loan beyond the honeymoon period when evaluating this type of rate.

Interest: The cost charged by the lender for borrowing the money, usually expressed as an annual percentage rate (APR).

Interest Only Loan: An interest only loan is a type of loan where the borrower is only required to pay the interest charges on the loan for a specified period, typically ranging from one to ten years. During this period, the borrower is not required to make principal repayments. As a result, the monthly repayments are lower compared to a loan with principal and interest repayments. However, it's important to note that once the interest-only period ends, the borrower will typically transition to making principal and interest repayments, resulting in higher monthly repayments. Interest-only loans are often used by investors to manage cash flow and maximize tax benefits, but they can also be used by owner-occupiers. Borrowers considering an interest only loan should carefully assess their financial circumstances and understand the long-term implications of this type of loan structure.

Investment home loan: Allows you to purchase a property as an investment and use the rental income to pay off your mortgage repayments.

Lender: The financial institution or bank that provides the home loan to the borrower.

Line of Credit: A line of credit, also known as a home equity line of credit (HELOC), is a flexible borrowing option that allows homeowners to access funds up to a predetermined credit limit. It is secured against the equity in the property. Similar to a credit card, borrowers can withdraw funds from the line of credit as needed and only pay interest on the amount borrowed. As borrowers repay the borrowed amount, the credit becomes available again, providing ongoing access to funds. A line of credit can be used for various purposes, such as home improvements, debt consolidation, or other expenses. It's important to note that interest rates and terms may vary, and borrowers should carefully consider the repayment requirements and potential risks before utilizing a line of credit.

LMI (Lenders Mortgage Insurance): Insurance coverage taken out by the lender to protect themselves against default risk when the borrower has a high LVR.

Loan Term: The agreed-upon period in which the borrower must repay the loan in full.

Low-doc loan: A loan for borrowers who have trouble providing paperwork needed for a traditional home loan, such as investors and the self-employed.

LVR (Loan-to-Value Ratio): The ratio of the loan amount to the appraised value of the property, expressed as a percentage.

Mortgage: A legal agreement that gives the lender a security interest in the property as collateral for the loan.

Mortgage Protection Insurance: Mortgage protection insurance, also known as mortgage insurance or loan protection insurance, is a type of insurance coverage designed to provide financial protection to borrowers in the event of unforeseen circumstances that may impact their ability to meet their mortgage repayments. It typically covers events such as disability, serious illness, involuntary unemployment, or death of the borrower. Mortgage protection insurance can help cover mortgage repayments for a specified period or pay off the outstanding loan balance entirely in the event of a covered claim. The terms and coverage of mortgage protection insurance can vary between insurance providers, so borrowers should carefully review the policy details, exclusions, and premiums before deciding to obtain this type of insurance. It's important to note that mortgage protection insurance is different from lenders mortgage insurance (LMI), which is insurance taken out by the lender to protect themselves against default risk for high loan-to-value ratio (LVR) loans.

Non-conforming loan: Secures a loan by using other means, such as a larger deposit, but may have higher interest rates.

Offset Facility/Account: An offset facility or account is a transaction account linked to a home loan. The balance in this account is offset against the outstanding loan balance, reducing the amount on which interest is calculated. For example, if a borrower has a home loan of $300,000 and an offset account with a balance of $50,000, they will only pay interest on the net amount of $250,000 ($300,000 - $50,000). By reducing the interest payable, an offset account can potentially save borrowers money and help repay the loan faster. The funds in the offset account remain accessible for everyday banking needs, and no interest is earned on the offset amount. It's important to check with the lender about any specific terms and conditions, as well as any fees or restrictions associated with an offset facility or account.

Partial Offset: A partial offset is a variation of an offset facility that allows borrowers to link a transaction account to their home loan to partially offset the outstanding loan balance. The funds held in the linked account are only partially offset against the loan balance, reducing the interest payable on the remaining loan amount. For example, if a borrower has a home loan of $400,000 and a partial offset account with a balance of $20,000, the interest will be calculated based on the net amount of $380,000 ($400,000 - $20,000). The partial offset arrangement provides a benefit by reducing the interest payable but to a lesser extent than a full offset account. It's important to review the terms and conditions specific to the partial offset arrangement offered by the lender, including any fees or restrictions associated with it.

Pre-approval: An initial assessment by the lender indicating the amount the borrower may be eligible to borrow, subject to final approval.

Principal: The original amount of money borrowed from the lender, excluding interest.

Rate Lock: A rate lock is an agreement between the borrower and the lender that guarantees a specific interest rate for a specified period. It is often used when there is an expectation of interest rate fluctuations in the market. By locking in a rate, the borrower ensures that their interest rate will remain unchanged during the lock-in period, regardless of any market fluctuations. This provides stability and certainty for borrowers during the home loan application process. However, rate lock agreements may come with certain conditions and fees, so it's important for borrowers to fully understand the terms and implications before entering into a rate lock arrangement.

Redraw Facility/Account: A redraw facility or account is a feature offered by some lenders that allows borrowers to access any additional repayments they have made on their home loan. It provides flexibility by enabling borrowers to withdraw funds from their loan beyond the required repayment amount. For example, if a borrower has made extra repayments on their home loan, they can access those funds through the redraw facility. This can be useful for unexpected expenses or to make additional investments. It's important to note that there may be restrictions, fees, or minimum redraw amounts associated with this facility. Borrowers should review the terms and conditions of their loan agreement to understand how the redraw facility works and any limitations that may apply.

Repayment: The regular installment paid by the borrower to the lender, which includes both principal and interest.

Reverse mortgages: Ideal for people who have paid off or nearly paid off their mortgage as reverse mortgages involves using the equity on your current home as security for a new loan.

Settlement: The final stage of a property purchase where legal ownership is transferred to the buyer and funds are exchanged.

Split rate (principal and interest) loan: Allows you to divide between fixed and variable rates, meaning you can enjoy fixed repayments and make some extra repayments if needed. If you're ready to buy a home and understand the jargon, our Home Loan specialists can help find a loan for you across the 40+ lenders we compare.

Stamp Duty: A government tax imposed on property transactions, including the purchase of a home.

Variable-Rate Loan: A home loan with an interest rate that fluctuates based on market conditions, potentially resulting in changing repayments.