Lending has a vocabulary problem. None of these words are difficult once someone explains them properly, and you should never feel awkward asking. Here they all are.
A rate that bundles the interest rate together with most standard fees, so you can compare loans on a fairer footing. It's calculated on a standard example loan, so it won't match your situation exactly - but a big gap between the advertised rate and the comparison rate is a signal to look at the fees.
A lender saying, in writing, roughly how much they'd lend you - subject to conditions and to finding a property they're happy with. It gives you a real budget and lets you bid with confidence. It is not a guarantee.
When a lender uses more than one of your properties as security for a loan. It reduces the lender's risk and reduces your flexibility - you can't easily sell or refinance one property without involving the whole arrangement. Generally worth avoiding.
The difference between what your property is worth and what you still owe. If your home is worth $900,000 and you owe $500,000, you have $400,000 of equity. It's the main engine of buying a second property.
An interest rate that doesn't move for an agreed term, commonly one to five years. Certainty of repayments is the benefit; the cost is limited extra repayments and a potential break fee if you exit early.
Funds you've saved over time - usually three months or more - as opposed to a gift or a windfall. Some lenders want to see a portion of your deposit meet this test, because it demonstrates you can hold money, not just have it.
Usually a parent, who offers equity in their own property as additional security for your loan. It can remove LMI and let you buy sooner. It's a serious legal commitment, and they should get their own advice.
Repayments that cover only the interest for a set period, so the loan balance doesn't reduce. Lower repayments now, higher later, and no equity built through repayments. A legitimate tool for investors, a trap when used by default.
A one-off insurance premium usually charged when your deposit is under 20%. It covers the lender if you can't repay and the property sells for less than you owe. You pay it; they're the ones insured.
A $640,000 loan on an $800,000 property is an 80% LVR. It's the number lenders care about most - it drives whether you pay LMI and often what rate you're offered. Lower is better.
An everyday account linked to your loan. Its balance is offset against the loan balance when interest is calculated, so $30,000 sitting in offset against a $600,000 loan means you're charged interest on $570,000. The money stays yours and available.
A small annual payment from the lender for as long as your loan stays in place, sometimes called trail. It's why brokers have a genuine interest in your loan still suiting you in three years - and why our annual reviews aren't charity.
A feature that lets you keep your existing loan when you move house rather than discharging and starting again. Useful when your current rate is sharp, though it can complicate a simultaneous sale and purchase.
Repayments that cover both interest and part of the balance, so the loan actually reduces. Standard for owner-occupiers, and the default most people should be on.
A facility letting you withdraw additional repayments you've made ahead of schedule. Similar in effect to an offset, but the money is legally the lender's until you redraw it, and access rules can be tightened.
A lender's assessment of your ability to meet repayments, based on income minus expenses and existing debts, tested at a rate around 3% above the actual one. It's usually what limits how much you can borrow, more than deposit.
The moment funds change hands, the title transfers and the loan starts. For a purchase, this is when you get keys. For a refinance, when the old loan closes and the new one begins.
Dividing your loan into two portions with different rate types, so you get some certainty and some flexibility. A common middle path when you can't decide between fixed and variable.
Charged by your state or territory on the purchase price. Often the largest cost after the deposit. First home buyers frequently pay a reduced amount or none at all below certain price thresholds.
An interest rate that can change over the life of the loan, usually following the Reserve Bank and your lender's own pricing. More flexible than fixed, less predictable.
If something on this page still doesn't make sense, that's a failure of the explanation rather than a failure of yours. Ring us and we'll go through it as many times as it takes.
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