100% Offset

To help reduce the interest on a home loan, a borrower may be able to link their loan account to their transaction account. Money held in the transaction account ‘offsets’ the interest charged to the home loan. For example, if there was $10,000 in the transaction account and the home loan principal was $300,000, interest would be charged on the difference being $290,000.

Application Fee

A fee the borrower pays for setting up the loan.

Basis Points

One basis point is equal to 0.01% interest. So, 25 basis points would be 0.25%.

Body Corporate

A corporation that manages the building and common areas on behalf of the owners of the units within the building.

Break Costs

If a borrower makes changes to their fixed rate loan, such as switching the loan to a variable rate or paying the loan before the expiry of the fixed rate period, a fee may be applied.

Bridging Finance

Generally a short term or temporary solution, this is a loan that can be used when you are buying a home but have not yet sold your exisitng home.

Building Inspection

An inspection of the property prior to purchase to check the building is structurally sound.

Comparison Rate

The comparison rate takes into account the interest rate and most fees and charges payable during the term of the loan, and is shown as a single interest rate. Please note that other costs such as early repayment fees and redraw fees are not included in the comparison rate.

Construction Loan

A loan used for building a new property.

Conveyancer

Hired by the buyer or seller, the conveyancer manages the coneyancing process.

Conveyancing

Transferring the ownership of the property from the seller to the buyer is known as conveyancing.

Cooling Off Period

The period of time during which the buyer can decide to not continue with the purchase. Cooling off periods vary between States.

Credit Limit

The maximum amount that a borrower can borrow against their home loan contract.

Credit Reference or Credit Report

A report showing the credit history of a borrower. This is prepared by an authorised credit reporting agency and requires permission from the borrower to obtain the credit report as part of the loan application.

Deposit Guarantee

If cash is not available for a deposit, a deposit guarantee can be used to help with the property purchase. The full purchase price will be required at settlement.

Drawdown Date

The first date a borrower draws down upon their loan.

Equity

The value of an asset, minus any outstanding loans.

First Home Owner Grant (FHOG)

A grant introduced by the Australian Government to help Australian’s with their first home purchase.

Fixed Interest Rate

The interest rate of the loan will stay the same during the fixed rate period, which means your repayments won’t change during the fixed term.

Government Charges

The fees and payments payable to the government/s associated with the loan. For exmaple, stamp duty, transfer and mortgage fees. The Government charges vary between states and territories.

Guarantee

A third party promise to cover the loan if the borrower is unable to make loan payments.

Guarantor

The third party guaranteeing to cover the loan if the borrower is unable to make loan payments.

Honeymoon Rate

A reduced interest rate that may be offered at the start of a loan. At the end of the honeymoon period, the interest rate will change to a standard variable rate.

Interest in Advance

Interest that is charged one year in advance. Generally only available on fixed rate loans for investment purposes.

Interest in Arrears

Interest that is charged at the end of a time period, generally at the end of the month.

Interest Only Loan

The borrower will only be required to pay off the interest on their loan for a certain period of time, usually one to five years. After this interest only period, the borrower will be required to make payments on the interest and the principal amount.

Introductory Rate

A reduced interest rate that may be offered at the start of a loan. At the end of the introductory period, the interest rate will change to a standard variable rate.

Investment Loans

A loan that is taken out for investment purposes.

Lenders Mortgage Insurance (LMI)

Insurance taken out by the lender that offers protection should the borrower not be able to pay their loan. This is generally required for loans with an LVR greater than 80%.

Line of Credit

An account that has a credit limit. A line of credit allows the borrower the flexibility to access funds from the account as often as needed, staying within the credit limit.

Loan Agreement (or facility agreement)

The formal contract that sets out the terms and conditions of the loan. The contract is between the borrower and the lender.

Loan to Value Ratio (LVR)

The Loan to Value Ration (LVR) is the amount of the loan compared to the value of the property, and is shown as a percentage. For example, if a home is worth $500,000 and the amount of the loan is $350,000 the LVR is 70%.

Lump Sum Payment

An extra, usually large, payment that is made on top of regular repayments

Monthly Service Fee

A monthly fee that may be payable to the lender. The fee will vary between lenders and loan types.

Mortgage

A legal agreement between a borrower and lender, giving security over a property as repayment of the money lent.

Mortgagee

The person or organisation who holds the mortgage.

Mortgagor

The person or organisation who borrows money to purchase the property.

Passed In

During auction, if the highest bid hasn’t met the reserve price, the property is passed in.

Pest Inspection

An inspection of the property prior to purchase to check for the presence of, and any damage by, pests and termites.

Portability

The ability to transfer your loan from one property to another.

Pre approval (or approval in principle)

Initial approval process where the lender estimates how much can be borrowed, based on the information provided to the lender (prior to finding a property to purchase).

Prepayment

Additional payment(s) made to a loan, that are over and above the scheduled repayments for the loan.

Principal

Principal is the amount of the loan which interest is calculated and paid.

Principal and Interest Loan

A loan that is made up of principal and interest repayments.

Rate Lock

Some lenders may lock in a fixed interest rate at the time a loan is approved. The rate lock period will vary between lenders and a fee may apply.

Redraw

Where this feature is available on your loan, it allows borrowers access to additional payments that have been made.

Refinancing

Renegotiating a home loan or taking out a new home loan with another lender. The aim of refinancing is to either increase the amount of a loan, or to secure a lower interest rate to reduce monthly repayments.

Repayment Holiday

A repayment holiday is a period of time the borrower can apply for when they are ahead on their loan repayments.

Repayments

The amount the borrower must repay on the loan at an agreed time, either fortnightly or monthly.

Reserve Price

The minimum price a seller will accept at auction.

Security

The property provided to secure a loan.

Settlement

Settlement is finalised when the transfer of ownership of a property from buyer to seller is completed.

Split Loans

A loan that is split into more than one account, for example a fixed rate loan account and a variable loan account.

Stamp Duty

The Government duty applied to a loan that is payable when a property is bought or sold. Stamp duty rates are dependent on the value price of the property and are set by each state and territory.

Switch Fee

A fee that may apply by making a change to your loan, for example, switching from a variable rate loan to a fixed rate loan.

Term

The agreed length of the loan.

Title Search

A search done on the title of the property to determine ownership and confirm any interests in the property.

Valuation

A report completed by a registered valuer for the lender, detailing their professional opinion on the property’s value.

Variable Interest Rate

An interest rate that can move up or down, which will also change the amount of your monthly loan repayments.

Vendor

The person selling the property.

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