Mortgage and Finance Glossary

Welcome to Elite Finance Partners comprehensive A-Z Mortgage and Finance Glossary. This glossary is designed to help you navigate the Australian mortgage landscape with confidence. We understand that some terms can be hard to understand and we’re here to help. Whether you’re a first home buyer, an experienced investor, or looking to refinance, understanding the key terms in the home loan process is what this guide will help you achieve.

A

Application Fee
A fee charged by lenders to cover the costs of processing a home loan application. Also known as an establishment fee or upfront fee.

Appraisal
A property valuation conducted by a qualified valuer to determine the current market value of the home.

Approval in Principle (AIP)
Also known as pre-approval, this is a lender’s indication that you qualify for a home loan based on your financial situation.

B

Break Costs
Charges that may apply if you exit a fixed-rate loan before the end of the fixed term.

Bridging Loan
A short-term loan used to finance the purchase of a new property before the sale of your existing one.

Borrowing Capacity
The maximum amount a lender is willing to lend to you based on your income, expenses, debts, and credit history.

C

Comparison Rate
A rate that combines the interest rate and most loan fees into a single percentage to help you compare home loans.

Conveyancing
The legal process of transferring ownership of real estate from one person to another.

Credit Report
A summary of your credit history used by lenders to assess your reliability as a borrower.

D

Deposit
An upfront payment made towards the purchase of a property, usually expressed as a percentage of the total purchase price.

Discharge Fee
A fee charged by lenders when you pay out and close your home loan.

Drawdown
The process of accessing funds from your home loan.

E

Equity
The difference between your property’s market value and the outstanding balance on your mortgage.

Extra Repayments
Additional payments made on top of your regular loan repayments to help reduce your loan term and interest.'

F

Fixed Interest Rate
An interest rate that stays the same for a set period, offering stability in repayments.

First Home Owner Grant (FHOG)
A government initiative providing financial assistance to eligible first home buyers.

Full Documentation Loan
A standard home loan that requires full financial documentation for assessment.

G

Guarantor
A third party, usually a family member, who agrees to be responsible for the loan if the borrower defaults.

Genuine Savings
Money that a borrower has saved over time, usually required by lenders as proof of financial discipline.'

H

Honeymoon Rate
A reduced interest rate offered for an introductory period on a new home loan.

Home Equity Loan
A loan that allows you to borrow against the equity in your property.'

I

Interest-Only Loan
A loan where you only pay the interest for a set period, usually resulting in lower repayments initially.

Interest Rate
The cost of borrowing money, expressed as a percentage of the loan amount.

J

Joint Application
A loan application with two or more parties to the loan. Often these types of loan applications are submitted by a married couple, or siblings. Both applicants are responsible for the repayments.

Joint Tenants
A type of property ownership where two or more people own a property equally. If one person dies, their share automatically passes to the remaining owner(s).

K

Key Fact Sheet
A document that must be provided by Australian credit providers when offering a credit card. It outlines the main features, interest rates, and fees.

KYC – Know Your Customer
A compliance process required under AML/CTF (Anti-Money Laundering / Counter-Terrorism Financing) laws in Australia. Lenders and financial institutions must verify the identity of clients.

L

Lenders Mortgage Insurance (LMI)
Insurance that protects the lender if the borrower defaults, usually required when borrowing more than 80% of the property’s value.

Loan-to-Value Ratio (LVR)
A percentage that expresses the loan amount as a proportion of the property’s value.

Line of Credit
A flexible loan arrangement that allows you to withdraw funds as needed up to an approved limit.

M

Mortgage Broker
A licensed professional who helps borrowers find and secure the most suitable home loan from a panel of lenders.

Mortgage Offset Account
A savings or transaction account linked to your home loan that helps reduce the interest charged by offsetting your loan balance.

Mortgage Broker
A licensed professional who helps borrowers find and secure the most suitable home loan from a panel of lenders.

Mortgage Offset Account
A savings or transaction account linked to your home loan that helps reduce the interest charged by offsetting your loan balance.

N

Negative Gearing
A strategy where the cost of owning an investment (usually a property) exceeds the income it generates, allowing the investor to claim the loss as a tax deduction.

Net Income
The income remaining after taxes and deductions. Lenders often use net income to assess borrowing capacity.

Non-Conforming Loan
A loan that doesn’t meet standard lending criteria (e.g., credit history, income documentation). Often offered by specialist or non-bank lenders.

Nominee
A person or entity appointed to act on behalf of another, often used in property transactions and trust arrangements.

Notice of Assessment
An official document issued by the ATO summarising an individual’s tax return, often requested by lenders to verify income.

O

Owner-Occupied Loan
A home loan used to purchase a property that the borrower intends to live in.

Overdraft
A facility attached to a transaction account that allows you to withdraw more money than you have up to an approved limit.

P

Principal
The amount of money borrowed to purchase a property.

Principal and Interest Loan
A loan where repayments cover both the interest charged and a portion of the loan principal.

Pre-Approval
See “Approval in Principle.”

Q

R

Redraw Facility
A feature that allows you to access extra repayments you’ve made on your home loan.

Refinancing
Replacing your current home loan with a new one, usually to get a better rate or different features.

Repayment Holiday
A temporary break or reduction in loan repayments, usually due to financial hardship.

S

Settlement
The final stage of a property purchase where ownership is transferred and the funds are disbursed.

Split Loan
A home loan that is divided into multiple parts, typically one fixed and one variable.

Stamp Duty
A state government tax on the purchase of property.

T

U

V

Valuation
A professional assessment of a property’s market value, often required by the lender and conducted by a professional valuation firm.

Variable Interest Rate
An interest rate that can change over time in response to market conditions, primarily movement in the Reserve Bank of Australia’s Cash Rate.

Vendor
The seller of the property.

W

X

Y

Z

Need expert advice or help securing the right home loan? Contact us at Elite Finance Partners.