Knowledge Hub · Glossary
Mortgage terms, in plain English
The jargon lenders use, translated — bookmark this one.
Krishna Avadhani
FBAA Accredited Broker
- LVR (Loan-to-Value Ratio)
- Your loan amount as a percentage of the property's value. A $450,000 loan on a $600,000 property is a 75% LVR. Lower LVR generally means better rates and no LMI.
- LMI (Lenders Mortgage Insurance)
- A one-off insurance premium, usually required when your LVR is above 80%. It protects the lender, not you, if you default — but it's what allows many buyers to purchase with a smaller deposit.
- Pre-approval
- A lender's conditional indication of how much they'd likely lend you, based on the information you've supplied so far. It's not a guarantee — final approval still depends on the specific property and a full assessment.
- Settlement
- The day ownership of the property formally transfers to you and the loan funds are released to the seller. This is the finish line of the purchase process.
- Offset account
- A transaction account linked to your loan; its balance reduces the amount you're charged interest on, while remaining fully accessible to you.
- Redraw facility
- Allows you to withdraw extra repayments you've made above the minimum required amount.
- Discharge fee
- A fee some lenders charge when you fully pay off or refinance away from a loan, covering their administrative cost of closing it.
- Serviceability
- A lender's assessment of whether your income can comfortably cover the loan repayments, alongside your other expenses and debts — usually tested at a higher "buffer" rate than the actual rate you'll pay.
- Comparison rate
- A rate that combines a loan's interest rate with most of its standard fees, intended to make it easier to compare the true cost between different loan products.
- Genuine savings
- Funds you've accumulated yourself over time (typically 3+ months), as distinct from a gift or a one-off deposit — some lenders require proof of this, particularly for higher-LVR loans.
- Equity
- The difference between your property's current market value and what you still owe on it.
- Cross-collateralisation
- Using more than one property as security for a single loan, or for loans across multiple properties. It can limit your flexibility later, which is why many brokers try to structure around it.
- Conveyancing
- The legal process of transferring property ownership, usually handled by a solicitor or licensed conveyancer working alongside your broker and lender.
- Stamp duty (transfer duty)
- A state government tax charged on most property purchases, calculated on the purchase price or market value — first home buyers may be eligible for a concession or exemption.
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