Reference
Mortgage glossary
The Australian lending vocabulary that comes up in nearly every conversation — written in plain English, without the jargon shadow-banking the answer. Bookmark this page or tap any underlined term you see across the site to read the same definition inline.
A
Add-backs
Income & serviceability- Non-cash or one-off expenses that a self-employed borrower can add back to net profit when a lender assesses serviceability — typically depreciation, interest expense on the loan being assessed, one-off legal or asset costs, and director super contributions above the SG minimum.
- Self-employed loan service
AFCA
AFCARegulators- The free, independent dispute-resolution scheme for financial complaints in Australia — covering banks, credit providers, brokers and insurers. Borrowers can escalate to AFCA if they can’t resolve a complaint directly with the firm first.
- afca.org.au
APRA
APRARegulators- The federal regulator overseeing banks, credit unions and insurers. APRA sets serviceability rules — including the 3% serviceability buffer and DTI flags — that every regulated lender must follow.
- apra.gov.au
ASIC
ASICRegulators- Australia’s corporate and financial-services regulator. Administers the National Consumer Credit Protection Act, licenses brokers (through Australian Credit Licences), and runs Moneysmart — the consumer money-literacy site.
- asic.gov.au
ATO
ATORegulators- Australia’s national tax authority. Issues NOAs, administers the FHSS scheme, runs PAYG and GST, and is the source of truth for self-employed income evidence used by lenders.
- ato.gov.au
Australian Credit Licence
ACLRegulators- The ASIC-issued licence required by anyone engaging in credit activities in Australia — including lenders and mortgage brokers (or the credit representative of an ACL holder). Carries ongoing compliance, conduct and disclosure obligations.
- ASIC — credit licensees
B
BAS
BASIncome & serviceability- A quarterly statement lodged with the ATO covering GST, PAYG withholding, and other tax obligations. Lenders ask for recent BASs from self-employed borrowers when income is materially higher than the last tax return — to evidence trend.
Basis points
bpsRates- A hundredth of a percentage point — 25 basis points (0.25%) is the unit most often used when the RBA moves the cash rate or when a lender adjusts pricing. "100 bps" means 1 percentage point.
Best Interests Duty
BIDRegulators- A statutory obligation on Australian mortgage brokers, in force since 2021, to act in each client’s best interests when recommending credit. It governs how brokers compare options, document advice and disclose conflicts.
- ASIC — Best Interests Duty
Break costs
Costs & fees- A fee charged by the lender when you exit a fixed-rate loan early — by refinancing, selling, or making large extra repayments above the allowed limit. The amount depends on how wholesale rates have moved since you fixed, and can be material on a large loan.
Bridging finance
Loan features- A short-term loan that lets you settle on a new property before your existing one sells. The "peak debt" period is interest-only and the loan is repaid when the existing home settles — strict timelines and end-debt rules apply.
- Home loan service
Building & pest inspection
Process- A pre-purchase report by a licensed inspector covering structural condition and pest activity. Not required by the lender but strongly recommended — issues found before exchange can be negotiated; issues found after settle on the buyer.
C
Cash rate target
OCRRates- The benchmark short-term interest rate set by the Reserve Bank of Australia each meeting. Variable home loan rates move broadly in line with the cash rate, though banks pass through changes by their own margins and timing.
- RBA cash rate history
Comparison rate
Rates- A single figure that bundles the loan’s interest rate with most fees, expressed as an annualised rate. Mandated in Australia so two loans can be compared on a like-for-like basis — but it assumes a $150,000 loan over 25 years, so always check fit for your actual scenario.
Conditional approval
Process- A lender’s confirmation that, based on the information provided, they would lend up to a specified amount — subject to a satisfactory valuation, final policy checks and any other conditions. Functionally similar to pre-approval at most lenders, valid 3 months.
Construction loan
Loan features- A loan that funds the build of a new home in stages, drawing down at slab, frame, lock-up, fix-out and completion. Interest-only during construction, then converts to standard P&I. Requires a fixed-price builder contract and progress inspections.
- Construction loan service
Conveyancing
Costs & fees- The legal process of transferring property ownership between buyer and seller — handled by a licensed conveyancer or property solicitor. Includes contract review, title checks, government enquiries, and coordinating settlement.
Cooling-off period
Process- A short window after signing a private-treaty contract during which a buyer can withdraw — usually 3–5 business days depending on the state. Does not apply to auction purchases. Withdrawing within the period typically forfeits a small percentage of the purchase price.
D
Debt-to-Income Ratio
DTIIncome & serviceability- Total household debt — including the new loan — divided by gross annual household income. APRA flags loans above 6× DTI as higher risk, so it directly affects how much most lenders will approve.
- How DTI works in Australia
Discharge fee
Costs & fees- A fee charged by your existing lender when you pay out (discharge) your home loan — usually $300–$400, plus a state-government mortgage discharge registration fee. Payable on refinancing, selling, or full early payout.
E
Equity
Deposit & LVR- The portion of your property you actually own — current market value minus what you still owe on the loan. Usable equity is typically 80% of the property value minus the loan balance — the bit above 80% is reserved by the lender as a buffer.
F
Family Home Guarantee
Deposit & LVR- A federal scheme for eligible single-parent and single legal-guardian buyers, allowing purchase with as little as 2% deposit and no LMI. Same Housing Australia administration as the First Home Guarantee — caps and eligibility checked carefully each year.
- Australian Government 5% Deposit Scheme
First Home Buyer
FHBProcess- A buyer purchasing their first owner-occupied home in Australia. FHBs may qualify for stamp duty concessions, the First Home Owner Grant in some states, the federal First Home Guarantee, and access to FHSS-released savings.
- First-home buyer service
First Home Guarantee
FHGDeposit & LVR- A federal scheme administered by Housing Australia that lets eligible first home buyers purchase with as little as 5% deposit and no LMI — the government guarantees the rest. Place caps and income/property limits apply per financial year.
- Australian Government 5% Deposit Scheme
First Home Owner Grant
FHOGDeposit & LVR- A one-off state or territory grant for eligible first home buyers — usually limited to new builds or substantially renovated properties, with property-value caps that vary by state. Cannot be used as deposit on its own; sits alongside genuine savings.
First Home Super Saver
FHSSDeposit & LVR- A federal scheme that lets first home buyers make extra concessional contributions into super and later withdraw them — plus earnings — to use as deposit. Tax-effective for many income brackets, with caps and ATO release rules that must be followed.
- ATO — First Home Super Saver Scheme
Fixed rate
Rates- A home loan rate locked in for a defined period — typically 1–5 years. Repayments don’t change during the fixed period, which is useful for budgeting, but most fixed loans cap or block extra repayments and apply break costs if you exit early.
G
Genuine savings
Deposit & LVR- Deposit funds that the borrower has accumulated over at least 3 months — most lenders require evidence of genuine savings to demonstrate financial discipline. Cash gifts, FHSS withdrawals and proceeds of sale are usually treated separately.
Gifted deposit
Deposit & LVR- A deposit contribution from a family member that you do not need to repay. Lenders require a signed gift letter confirming it’s not a loan, and the funds usually need to sit in your account for 1–3 months before settlement.
Guarantor loan
Loan features- A loan where a family member (commonly a parent) uses equity in their own property as additional security so the borrower can avoid LMI or buy with a smaller deposit. The guarantor is on the hook for the guaranteed portion until equity in the new property grows enough to release them.
H
Household Expenditure Measure
HEMIncome & serviceability- An ABS-derived benchmark of typical household living expenses, by income and postcode. Lenders use HEM as a floor when assessing serviceability — so under-declaring expenses generally won’t help, because HEM is applied if your declared spend is lower.
I
Interest-only
IOLoan features- Repayments that cover only the interest charged, so the loan balance does not reduce during the IO period (usually 1–5 years). Common on investment loans for tax and cashflow reasons, but lifetime cost is higher than P&I.
- Compare IO vs P&I
Investment loan
Loan features- A loan to buy or refinance a property you rent out. Investment rates are typically 0.10–0.40% higher than owner-occupied rates, with stricter LVR limits and the option of interest-only repayments. Rental income is usually shaded by 20–30% in serviceability.
- Investment loan service
L
Lender valuation
Process- An independent estimate of the property’s value, ordered by the lender as part of the approval process. The lender uses the lower of the contract price or the valuation when calculating LVR — so a "low val" can change the deposit you need to find.
Lenders Mortgage Insurance
LMICosts & fees- A one-off insurance premium the borrower pays so the lender is protected if the loan defaults — required by most lenders when LVR is above 80%. The premium is usually added to the loan rather than paid upfront.
- First-home buyer pathway
Loan portability
Loan features- A feature that lets you keep your existing loan in place while changing the property securing it — useful when you sell and buy on the same day, or move home without refinancing. Saves discharge and reapplication fees, but is only allowed in narrow scenarios.
Loan-to-Value Ratio
LVRDeposit & LVR- The loan amount expressed as a percentage of the property’s value. Borrowing $400,000 against a $500,000 property is 80% LVR. Lenders price loans by LVR band and most charge LMI when LVR is above 80%.
- Estimate your borrowing power
M
Mortgage registration fee
Costs & fees- A state or territory government fee for registering the mortgage on the property title. A separate transfer registration fee applies when buying. Both are small compared to stamp duty but should be budgeted in upfront costs.
N
NCCP Act
NCCPRegulators- The federal law that regulates consumer lending in Australia. It introduced responsible-lending obligations, Australian Credit Licences, and the framework ASIC uses to discipline lenders and brokers.
- NCCP Act on legislation.gov.au
Negative gearing
Income & serviceability- When the costs of holding an investment property (interest, depreciation, fees) exceed the rental income, the shortfall reduces your taxable income — i.e. the loss is "negatively geared". Australian tax law allows this offset against PAYG and other income, subject to ATO rules.
- ATO — Rental properties
Notice of Assessment
NOAIncome & serviceability- The ATO document confirming your assessable income, deductions, and tax payable for a financial year. Lenders use the most recent 1–2 NOAs as their primary evidence of self-employed income, alongside the matching tax returns.
O
Off-the-plan
Process- Buying a property — usually an apartment or townhouse — before it’s built, based on plans and a marketing display. Deposit goes into trust until settlement (often 1–2 years away), and valuation risk sits with the buyer if the market moves before completion.
Offset account
Loan features- A transaction account linked to your mortgage. The balance is offset against your loan principal each day, so you only pay interest on the difference. Used well, an offset can shave years off the loan without locking the money away.
- Offset savings calculator
Owner-occupied loan
Loan features- A loan to buy or refinance the home you live in (or intend to live in). Owner-occupied loans typically have the lowest interest rates, the most generous LVR limits, and access to government schemes like the First Home Guarantee — but you must actually live there to keep the rate.
P
Package fee
Costs & fees- An annual fee — often $300–$400 — charged by lenders for "professional package" home loans, in exchange for discounted interest rates, fee-free transaction accounts, and bundled credit cards. Whether it’s worth it depends on loan size and the rate discount.
PAYG income
PAYGIncome & serviceability- Pay As You Go — wages or salary received from an employer with tax withheld at source. Lenders usually need 2–3 recent payslips, a year-to-date figure, and confirmation of probation. PAYG borrowers are easier to assess than self-employed, but bonus and overtime income is shaded.
PEXA
PEXAProcess- The electronic platform used by Australian lenders, conveyancers and land registries to handle settlement. Replaces the paper-and-bank-cheques approach with a same-day digital transfer of title and funds — most settlements run through PEXA today.
- pexa.com.au
Pre-approval
Process- Conditional approval of a loan amount before you find a property — based on income, deposit and credit checks. Pre-approval lets you bid with confidence, but is subject to property valuation and any policy changes by the lender.
- Start a structured application
Principal & Interest
P&ILoan features- Repayments that pay down both the loan balance (principal) and the interest charged. Standard repayment shape for owner-occupied home loans — the balance reduces every month.
- Compare IO vs P&I
R
Redraw
Loan features- A facility on most variable loans that lets you withdraw extra repayments you’ve made above the scheduled amount. Useful as a low-friction buffer — but redrawn funds are taxed differently to offset balances on investment loans.
Refinancing
Process- Replacing your existing home loan with a new one — either with the same lender or a different one. Done well, refinancing reduces interest cost, releases equity, or restructures the loan; done badly it pays only fees and break costs.
- Refinancing service
Regional First Home Buyer Guarantee
Deposit & LVR- A federal scheme for eligible first home buyers in regional Australia, allowing purchase with as little as 5% deposit and no LMI. Place caps and regional-area definitions reset each financial year.
- Australian Government 5% Deposit Scheme
Rental yield
Income & serviceability- A property’s annual rental income expressed as a percentage of its value. Gross yield uses headline rent; net yield deducts costs (rates, insurance, management). A useful comparison metric across markets — but yield alone does not determine investment returns.
Reserve Bank of Australia
RBARegulators- Australia’s central bank. Sets the cash rate target, manages monetary policy, and publishes the statements lenders and brokers watch most closely each month.
- rba.gov.au
Reverse mortgage
Loan features- A loan secured by a home you own outright (or close to it) that pays you regular instalments or a lump sum, with the balance compounding and repaid when the property is eventually sold. Designed for retirees — strict consumer protections apply, including the "no negative equity" guarantee.
S
Serviceability
Income & serviceability- A lender’s assessment of whether you can afford the loan over its life — at today’s rate plus a 3% buffer required by APRA. Serviceability, not deposit, is what limits most borrowing decisions in Australia.
- Borrowing power calculator
Settlement
Process- The day legal ownership of the property transfers. Funds move from the lender to the seller, titles change hands, and the keys become yours. In Australia, settlement is increasingly handled electronically through PEXA.
Split loan
Loan features- A home loan structured as two (or more) sub-accounts — typically part fixed and part variable. Lets you hedge: lock in part of your repayment while keeping the rest variable for offset benefit and flexible extra repayments.
- Split loan calculator
Stamp duty
Costs & fees- A state or territory tax payable when you buy property — calculated on the dutiable value of the property and varying by state, buyer type and purpose. First-home buyer concessions can reduce or remove stamp duty in many states.
- Stamp duty estimator
T
Top-up
Loan features- Borrowing additional funds against your existing loan, secured by your usable equity. Common uses are renovations, deposits on an investment property, or consolidating other debts. Lenders ask for the purpose and may apply additional verification above $50–100k.
U
Unconditional approval
Process- Final approval of a specific loan against a specific property — issued only after the lender has the signed contract, the valuation, and all supporting documents. Once unconditional, you can satisfy the finance clause and proceed to settlement.
V
Variable rate
Rates- A home loan rate that can move up or down at the lender’s discretion — usually loosely tracking the RBA cash rate, but with each lender setting its own margin and timing. Variable loans are flexible: full offset, unlimited extra repayments, and low or no break costs to switch.
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