Australian Home Loan Glossary

A

Amortisation

The gradual reduction of a loan balance through scheduled repayments of principal and interest over the loan term.

APRA (Australian Prudential Regulation Authority)

The government agency that regulates banks and lenders, setting rules like serviceability buffers and investor-loan caps.

ASIC (Australian Securities and Investments Commission)

The government regulator of credit licences, financial advice and consumer protection for mortgage brokers.

B

Break cost

A fee charged by your current lender if you exit a fixed-rate loan early (by refinancing or selling). Calculated based on interest rate movements since you fixed.

Bridging finance

A short-term loan that lets you buy a new home before selling your existing one. Usually 6–12 months maximum; interest-only during the bridging period. See our upgrading guide.

Building and pest inspection

A pre-purchase check by a qualified inspector for structural defects and pests. Typically $400–$700 per property in 2026.

C

Capital gains tax (CGT)

Tax payable on the profit when you sell an investment property. Owner-occupier homes are exempt. A 50% discount applies for investments held 12+ months. See our property accountant guide.

Cash rate

The RBA’s target policy rate, which influences variable home loan rates. Set at each RBA board meeting.

Comparison rate

The true cost of a loan expressed as a single percentage, including interest plus most standard fees. Designed by ASIC to let you compare loans fairly.

Conditional approval (pre-approval)

A preliminary “yes” from a lender based on your documented income, expenses and credit history. Subject to a valuation and formal checks.

Construction loan

A loan that releases funds in progress payments as your home is being built, rather than all at once.

Contract of sale

The legally binding document transferring ownership of a property from seller to buyer.

Conveyancing

The legal work of transferring property ownership, including title searches, contract review and settlement. Done by a conveyancer or solicitor.

Cooling-off period

A 3–5 business day window after signing a contract (varies by state) where the buyer can withdraw for a small penalty, often 0.25% of purchase price. Doesn’t apply to auction purchases.

Credit Representative (CR)

A mortgage broker authorised under an Australian Credit Licence (ACL) to provide credit advice and arrange loans. Each has a unique CR number.

D

Debt-to-income ratio (DTI)

Total debt divided by gross annual income. APRA flags DTI above 6× as “high” and most lenders cap at 8–9×.

Depreciation

Tax deduction for wear and tear on investment property assets (building, fittings). Claimable annually, often worth $3,000–$15,000 per year with a quantity surveyor’s schedule.

Discharge fee

A fee charged by your current lender when you refinance or pay off the loan. Typically $150–$400 in 2026.

E

Equity

Your property’s current market value minus your outstanding loan balance. Can be used as a deposit for an investment property or upgrade.

F

FBAA (Finance Brokers Association of Australia)

A professional association for mortgage brokers with a voluntary code of conduct and ongoing training requirements.

First Home Guarantee (FHG)

Federal scheme allowing eligible first home buyers to purchase with a 5% deposit without paying LMI. Limited annual places; property and income caps apply by region. See our FHG guide.

First Home Owner Grant (FHOG)

State-based one-off grant for first home buyers, usually for new builds. Amount varies by state ($10K–$30K).

First Home Super Saver Scheme (FHSSS)

ATO scheme letting first home buyers save up to $50,000 inside super at concessional tax rates, then withdraw for a deposit.

Fixed rate

An interest rate locked in for a set term (1–5 years usually). Repayments don’t change during the fixed period. See fixed vs variable.

Formal (unconditional) approval

Final lender approval after valuation and all checks. Means the loan will fund on the agreed date.

G

Genuine savings

Funds you’ve accumulated or held for 3+ months (not gifted or borrowed). Most lenders want 5% of the purchase price as genuine savings.

Guarantor loan

A loan where a family member (usually parents) uses their own property equity as additional security. Can eliminate LMI or increase borrowing power.

I

Interest-only (IO) loan

Repayments cover interest only, not principal. Loan balance stays the same during the IO period. Common for investment properties.

L

Lenders Mortgage Insurance (LMI)

Insurance that protects the lender (not you) if you default on a loan with less than 20% deposit. Typical cost $5,000–$30,000, usually added to the loan balance. See our LMI guide.

Loan-to-value ratio (LVR)

Your loan amount divided by the property’s value, expressed as a percentage. An 80% LVR avoids LMI; 95% is the typical maximum.

Loan term

The total length of time over which you’ll repay a loan. Most Australian home loans are 25–30 years; longer terms reduce monthly repayments but cost more in total interest.

M

MFAA (Mortgage & Finance Association of Australia)

The largest industry body for Australian mortgage brokers, with a mandatory code of practice for members.

N

Negative gearing

When an investment property’s expenses (interest, rates, maintenance) exceed rental income, creating a tax-deductible loss against other income.

O

Offset account

A transaction account linked to your home loan. Every dollar in the offset reduces the interest charged on your loan, dollar-for-dollar.

Owner-occupier

A loan for a property you live in. Typically comes with lower interest rates than investment loans.

P

Portability

A feature that lets you take your existing loan with you when you sell and buy a new property, avoiding refinance costs.

Principal and interest (P&I)

Loan repayments that cover both the interest charged and a portion of the original loan amount. Standard for owner-occupier loans.

R

RBA (Reserve Bank of Australia)

Australia’s central bank. Sets the cash rate that drives variable home loan rates.

Redraw facility

A feature that lets you access extra repayments you’ve made on your loan. Similar benefit to an offset, but funds are classified as “repaid” not “saved”.

Refinancing

Switching your home loan to a different lender (or a different product with the same lender) to access lower rates, better features, or release equity. See our refinancing checklist.

Rental yield

Annual rental income as a percentage of property value. Gross yield ignores costs; net yield accounts for them.

S

Serviceability

A lender’s assessment of whether you can comfortably repay a loan, based on income, expenses and buffers.

Serviceability buffer

An interest rate margin (currently 3% per APRA) that lenders add to the advertised rate when assessing your repayment capacity.

Settlement

The day ownership transfers, funds are paid, and keys are handed over. Usually 30–90 days after contract signing.

Split loan

A loan divided into fixed and variable portions, letting you get some rate certainty (fixed) and some flexibility (variable).

SMSF loan

A loan to buy an investment property inside a Self-Managed Super Fund. Limited recourse borrowing with tighter lending criteria.

Stamp duty

State-based tax on property transfers. Ranges from 4–5.5% of purchase price, with first-home-buyer concessions available in every state.

V

Valuation

A lender’s formal estimate of a property’s market value, done by an accredited valuer. The loan is based on the lower of valuation or purchase price.

Variable rate

An interest rate that moves up or down over time, typically in response to RBA cash rate changes. See fixed vs variable.