Common home loan terms explained

Confused about the jargon around mortgages and home buying? You’re not alone. This guide aims to shed some light on the more confusing terms.

by Anthony Stevenson

Last update 1 December 2021

Common home loan terms explained

Overview

We've put together some of the more common terms you’ll find while researching home loans and what they mean.

Home Loan Type

Bridging loan

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

Construction loan

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

Fixed loan

Allows you to lock-in or “fix” the current interest rate at the time of settlement. Can be fixed for up to 5 years.

Variable loan

Loan repayments increase or decrease with the fluctuating interest rate, offers features like the ability to make extra repayments on the loan.

Interest only loan

Low repayment loan where you only pay off the interest on the loan instead of the amount you borrowed from the bank and interest.

Introductory loan

12 month period with a lower rate, but payments usually increase after this period.

Investment home loans

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

Line of credit

A flexible loan that has a defined amount of money you can access as needed, can use the equity on your home as security.

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.

Non-conforming loan

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

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.

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.

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This guide is opinion only and should not be taken as financial advice. Check with a financial professional before making any decisions.

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