Home loan glossary

Comparison rate is a statutory percentage that folds standard upfront and ongoing fees into the headline rate on a $150,000 / 25-year benchmark loan, so different fee structures become directly comparable.

The comparison rate warning is a statutory disclosure every Australian home-loan ad must carry — it explains that the comparison rate is computed on a $150,000 / 25-year benchmark and may not apply to loans of other sizes or terms.

Discount margin is the percentage discount a lender offers off their standard variable rate as part of a package or promotion — typically 0.50-1.20% on home loans, lifting it to 1.50-2.00% for the largest premium-banking customers.

A fixed-rate loan locks the interest rate for a chosen term — typically 1, 2, 3 or 5 years — so repayments don't move with the cash rate cycle until the term ends.

An introductory or 'honeymoon' rate is a discounted variable rate offered for a limited period (typically 12 months) at the start of a loan — after which the rate reverts to the lender's standard variable rate plus any package discount.

The cash rate is the interest rate the Reserve Bank of Australia sets for overnight inter-bank lending — it anchors home-loan variable rates, savings rates, and broader credit pricing across the economy.

The standard variable rate is each lender's reference variable interest rate — the public benchmark off which package discounts (typically 0.50-1.20%) are subtracted to produce the actual rate borrowers pay.

A variable-rate loan moves with the lender's pricing decisions and the RBA cash rate cycle — the rate (and your repayment) can rise or fall over the life of the loan.

Amortisation is the gradual reduction of a loan balance through scheduled principal-and-interest repayments — each period's payment covers the interest charge plus a slice of principal calculated to retire the loan over the term.

A bridging loan is a short-term home loan (typically 6-12 months) that covers the gap between buying a new property and selling your existing one — interest is capitalised onto the loan rather than paid monthly.

A construction loan funds a build progressively through 5-6 drawdown stages, with interest-only repayments on the drawn balance during construction, then converts to a standard P&I home loan at completion.

Cross-collateralisation is when multiple properties are pledged as security against multiple loans with the same lender — each property's equity supports every loan, which simplifies approval but constrains future flexibility.

Equity is the portion of the property you own outright — current property value minus the outstanding loan balance. A $700,000 home with a $400,000 loan represents $300,000 of equity.

An interest-only loan asks you to pay only the interest charge each period — the loan principal stays unchanged until the IO term ends, typically after 3-5 years, then reverts to principal-and-interest.

An investor home loan is a mortgage to fund a property bought to rent out rather than live in — typically priced 0.20-0.40% above owner-occupier rates and assessed against rental income plus the borrower's own.

A line of credit home loan is a revolving facility secured against your property — you can draw down and repay up to an approved limit without re-applying, with interest charged only on the balance drawn.

A low-doc loan accepts alternative income evidence (BAS, accountant's letter, business bank statements) instead of standard payslips and tax returns — designed for self-employed borrowers with valid income they can't easily verify the orthodox way.

Negative gearing is when an investment property's annual costs (interest, rates, depreciation, maintenance) exceed its rental income — the resulting loss can be deducted against the investor's other taxable income under Australian tax law.

An offset account is a transaction account linked to your home loan whose balance reduces the loan amount on which interest is charged — $50,000 in offset against a $500,000 loan means interest is charged on $450,000 only.

P&I repayments cover both the interest charged for the period AND a portion of the loan principal, so the loan balance reduces month-by-month and the loan pays off over the agreed term.

Redraw is the ability to withdraw extra repayments you've made above the minimum schedule — same interest saving as offset while the money sits there, but trickier to access in a hurry.

A reverse mortgage is a home loan available only to homeowners aged 60+ that lets them borrow against the equity in their home without making regular repayments — the loan balance grows over time and is repaid from the eventual sale of the property.

A split loan divides one mortgage into a fixed-rate portion and a variable-rate portion so you get certainty on part of the balance while keeping flexibility (offset, extra repayments) on the rest.

Depreciation lets investment property owners deduct the wear-and-tear on the building (Division 43 — 2.5%/yr over 40 years on construction cost) and on removable plant and equipment (Division 40 — varying lives) against rental income.

Genuine savings is the portion of a deposit lenders require to be accumulated over 3+ months in your own account — proves you can save consistently, distinct from gifted, inherited, or windfall funds.

A gifted deposit is cash provided by a family member (usually parents) to help fund a property purchase — accepted by lenders with a written 'gift letter' confirming the funds are non-repayable, but doesn't count as genuine savings.

A guarantor loan uses a family member's property as additional security so the borrower can buy with little or no deposit and avoid LMI — typically the guarantor pledges 20% of the purchase price worth of their own equity.

LVR is the size of your home loan expressed as a percentage of the property's appraised value — a $400,000 loan on a $500,000 home is 80% LVR.

Annual loan fees (commonly $395-$495) are charged once per year by lenders offering a 'professional package' product — the fee covers a transaction account, credit card, and a discount of 0.50-1.20% off the standard variable rate.

CGT is the tax on the profit from selling an asset, including property — Australian investors get a 50% discount on the taxable gain when the asset has been held longer than 12 months, and the principal place of residence is exempt entirely.

A cashback offer is a one-off lump sum a lender pays a new or refinancing borrower at settlement — typical Australian offers in 2025-26 range from $2,000 to $4,000.

A discharge fee is a one-off administrative charge ($300-$700) your existing lender levies when you pay out the loan — common on refinances and property sales.

Exit fees (also called deferred establishment fees) were one-off charges lenders levied for paying out a variable home loan within the first 3-5 years — they were banned on new variable loans by ASIC in July 2011. Fixed-rate break costs are a separate category and still apply.

A break cost is the fee a lender charges when you exit a fixed-rate loan before the term ends — calculated as the difference between your fixed rate and the lender's current funding rate over the remaining term, applied to the loan balance.

LMI is a one-off premium that protects the lender (not the borrower) when the LVR is above 80%; typical cost on a $500,000 loan at 90% LVR is $7,000–$11,000 added to the loan balance.

Mortgage registration fee is a state-government charge ($130-$300 depending on state) paid at settlement to register the lender's mortgage interest over the property on the title — distinct from stamp duty and separately charged on each loan.

A package loan bundles a home loan with a transaction account and credit card under one annual fee (commonly $395-$495) in exchange for a discount of 0.50-1.20% off the standard variable rate.

A rate lock fee is a one-off charge (commonly $395-$795) you can pay during loan approval to lock in today's fixed rate for 60-90 days while the loan is processed, protecting against fixed-rate rises before settlement.

Settlement agent and conveyancer fees combined typically run $800-$2,500 on a residential purchase — covering contract review, title searches, settlement coordination, and the disbursements (search fees, registration fees) that the conveyancer pays on your behalf.

Stamp duty is a state government tax on property transfers, typically 3-5.5% of the purchase price, paid in full at settlement — first home buyers usually get a full or partial exemption.

Strata title is the form of property ownership used for apartments, townhouses and other multi-unit developments — you own your unit outright plus a share in the common property (driveways, lifts, pools), managed by an owners' corporation that levies strata fees.

Valuation fee is the cost the lender charges (or passes through) for ordering an independent property valuation during loan approval — typically $0-$500, with most lenders absorbing the cost on standard residential applications.

Clearance rate is the percentage of auctioned properties that sold (under the hammer, pre-auction, or post-auction same day) divided by total auctions held — Australia's national average sits around 60-70% in a balanced market.

CCR is the Australian mandatory credit reporting regime that requires lenders to report 24 months of monthly repayment history (not just defaults) — borrowers with consistent on-time repayments now look genuinely lower-risk to lenders than under the old negative-only system.

The contract of sale is the legal document that records all terms of a property purchase — price, deposit, settlement date, special conditions, included chattels, vendor and buyer details. It's prepared by the seller's conveyancer and reviewed by the buyer's before signing.

Conveyancing is the legal process of transferring property ownership — typically handled by a licensed conveyancer or solicitor for $800-$2,500, covering contract review, title search, settlement coordination, and registration of the transfer.

Cooling-off is a statutory window (typically 3-5 business days, varying by state) after signing a property contract where the buyer can withdraw with a small penalty — usually 0.20-0.25% of the purchase price.

Your credit score is a number from 0-1200 (Equifax) or 0-1000 (Experian/illion) that summarises your credit history — lenders read it to assess default risk. Australian scores are based on hard credit enquiries, defaults, and repayment history under Comprehensive Credit Reporting.

DTI is total debt (including the new home loan) divided by gross annual household income — APRA's benchmark for elevated risk is DTI ≥ 6.

HEM is a benchmark of typical household living expenses by household size and income — lenders use it as the floor when you declare expenses lower than the benchmark for your household type.

Pre-approval is a written commitment from a lender, valid 3-6 months, that they would lend you up to a stated amount subject to confirming the property and a few final conditions.

A bank-ordered valuation is a Certified Practising Valuer's independent assessment of the property's market value commissioned by the lender as part of loan approval — usually 0-5% below the contract price.

To refinance is to replace your existing home loan with a new one — usually at a sharper rate or with better features — by paying out the old loan and registering a new mortgage with a different lender.

Serviceability is the lender's assessment of whether you can comfortably repay the loan on a stressed rate (current rate plus APRA's 3% buffer), after living expenses, taxes and other commitments.

Settlement is the day the property legally changes hands — the lender releases the loan amount, the buyer pays the balance, the seller hands over the title and keys, all coordinated by the conveyancer/solicitor.

The Family Home Guarantee is a Home Guarantee Scheme stream specifically for eligible single parents and single legal guardians — 2% deposit, no LMI, available for both first home buyers AND single parents previously on the property ladder.

Australian first home buyers can stack up to four concessions: the federal Home Guarantee Scheme (no LMI), the state First Home Owner Grant (cash), state stamp-duty exemption, and shared-equity Help to Buy — collectively saving $30,000-$80,000+ at settlement.

The FHOG is a one-off state-government grant for first home buyers buying or building a new (never-occupied) home, typically $10,000-$30,000 depending on the state and property type.

FHSSS lets first home buyers contribute up to $15,000/year (max $50,000 total) of pre-tax salary into superannuation, then withdraw it (plus earnings) for a first home deposit — saving income tax on the contributions versus saving in a regular bank account.

Help to Buy is the federal Government's shared-equity scheme launched 2024: Government contributes up to 40% of the property price for new builds (30% existing) for eligible buyers with as little as a 2% deposit and no LMI.

The HGS is a federal scheme where the Government guarantees up to 15% of an eligible buyer's loan, letting them buy with a 5% deposit and no LMI — covers first home buyers, regional buyers, single parents and key workers.

The Regional First Home Buyer Guarantee is a Home Guarantee Scheme sub-stream specifically for first home buyers in regional Australia — 5% deposit, no LMI, and 10,000 places per financial year reserved for buyers in eligible regional postcodes.

A shared equity scheme has the Government (or a private investor) take a partial ownership stake in your home in exchange for contributing to the deposit and reducing your loan size — the contribution is repaid from sale proceeds, plus the same percentage of capital gain.