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
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
B
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
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.
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
F
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
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.
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
L
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-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
O
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
P
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
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
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.
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
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