Our home loan dictionary

Key terms and definitions

Additional home loan repayment

A feature that allows you to make extra repayments on your home loan so you may pay it off sooner.

Application fee

A fee you pay when you set up your home loan.

Basis points

Basis points are units used in finance to measure changes in interest rates or percentages. One basis point is a unit equal to one hundredth of one percentage point (0.01%).

BICOE (Construction loan) or Suitable for building

A home loan that lets you drawdown your funds as the building project progresses—and you need money to pay the builders. This option is available on selected variable rate loans.

Bridging finance

A loan to cover you after you buy a new home and before you sell your old home (generally temporary and short-term).

Comparison rate

Includes both the interest rate and most of the fees and charges that are payable over the life of your loan. It's especially useful to compare the comparison rate between different lenders (note: redraw and early repayment fees, or fee waivers are not included and may affect the cost of your loan).

Conditional approval

Approval in principle is a useful pre-purchase exercise that gives you an indication of how much you can borrow (based on the information you've given us).

Conveyancer

A conveyancer is an expert who represents you during the home transfer (conveyancing) process.

Conveyancing

The legal process of transferring ownership of real property from the seller to the buyer.

Cooling off period

The time during which the property buyer can withdraw from or cancel a contract of sale without facing any penalties. 

Credit limit (or facility limit)

The maximum amount you can borrow under your home loan contract.

Credit reference or credit report

A report from an authorised credit reporting agency which shows your credit history (note: we need your permission to obtain this).

Credit score

A credit score is a number that suggests how likely you are to repay borrowed money based on your overall financial history.

Deposit guarantee

A cash deposit substitute.

Direct debit

Direct debit is an automatic payment method that transfers money from your bank accounts to another to pay bills, loans or subscriptions. 

Drawdown

In banking, a drawdown is when you take out a part or all of your agreed loan or credit amount from your bank.

Drawdown date

When you actually use your loan funds for the first time.

Economic costs (or break costs)

Economic costs is a fee which may be payable if you switch your loan from a fixed to a variable rate (during the fixed rate period). Or if pay out some or all of your loan before the fixed rate period ends.

Equity

Equity is essentially the difference between your home’s market value and the amount you still owe on your mortgage.

First Home Owner Grant (FHOG)

First Home Owner Grant (FHOG) is a national grant (funded by the states and territories) that's given to first home buyers.

Fixed interest rate

An interest rate that stays the same for a set period. Accordingly, your repayments also remain the same.

Government charges

Charges levied by the government (including stamp duty, mortgage registration fees etc.).

Guarantee

An undertaking by a third party (friends or family) to pay your loan if you’re unable to.

Guarantor

The third party (usually friends or family) who provide your guarantee.

Honeymoon rate

A lower interest rate offered at the start of your loan (also known as the 'honeymoon period') which reverts to a standard variable rate after the honeymoon period ends.

Interest in advance

Interest charged on a loan at the beginning of a set time. For instance, charging the first year’s interest at the first month of a loan (available for fixed rate loans for investment purposes).

Interest in arrears

Interest charged on a loan at the end of a set time.

Interest only repayments

Interest only repayments are where you defer the repayment of your loan principal for an agreed period of time and only make interest payments. Once the agreed interest only period ends, you will begin to repay your principal.

Introductory rate

Like a 'honeymoon rate', a lower interest rate offered at the start of your loan (which converts to a standard variable rate once this period ends).

Investment loans

Loans used for investment purposes (such as the purchase of an investment property).

Lender's mortgage insurance

Lender's Mortgage Insurance (LMI) is a one-off insurance payment which covers your lender in case you can’t make your repayments. It's required for home loans with a loan-to-value ratio (LVR) over 80%.

Line of credit

Line of credit is a transaction account with a credit limit. While there’s no fixed repayment, you need to make payments to cover the interest and fees on the loan.

Loan agreement (or facility agreement)

The contract between you and us which sets out the terms and conditions of your loan.

Loan-to-value ratio

The loan-to-value ratio (LVR) is your loan amount divided by the appraised value of the property. For example, if your property valuation is $300,000 and your loan is $240,000, then the LVR is 80%.

Lump sum payment

An unscheduled extra repayment made to your loan.

Monthly service fee

A fee you pay each month on your loan account.

Mortgage

Your home loan. A document we use as security for your loan.

Mortgagee

That’s us—we're the ones who make the loan (and hold a mortgage as security).

Mortgagor

That’s you—you’re repaying the loan (and you give us a mortgage as security).

Offset

A transaction account linked to your home loan that offsets your principal loan and lowers the interest accruing on your home loan. The more money in the offset account, the less interest you pay on your home loan.

Off-the-plan

Buying off-the-plan means buying a property before it’s built based on the plans and designs shared by the developer. 

Portability

The ability to ‘move’ a loan from one security (property, term deposit, etc.) to another. For instance, you can use your current loan to buy a new home, then swap the security from your current loan to your new home.

Prepayment

Any extra loan payments you make on top of your scheduled repayments.

Prepayment fee

You may pay this if you pay out your loan in full during a fixed interest rate period, or if you make extra payments. Only applies to fixed rate loans.

Principal

The amount still owing on your loan (note: interest is calculated on the principal).

Principal and interest repayments

A repayment structure where you repay not only the interest but start chipping away at the principal.

Property value

Your property value as determined by us. We could use your property's purchase price, get an external valuer in, or else do our own valuation.

Rate Lock

Let’s you lock in a fixed interest rate quote for three months when your loan's approved. If interest rates go up before the loan drawdown date, you’re guaranteed the original rate.

Redraw

A loan feature that lets you withdraw any extra repayments you may have made to your home loan.

Refinancing

Where you pay off an existing loan—and set up a new one.

Repayments

The amount your loan contract says you must pay at an agreed time (like fortnightly or monthly).

Repayment holiday

If you’re ahead in your repayments, you can apply for a break—a 'holiday'—on your repayments.

Security

An asset (eg. property, term deposit etc.) that's used to secure your loan.

Serviceability

Serviceability is essentially the lender’s assessment of whether you can afford to repay a loan based on your income, expenses and other existing debts.

Split loans

Splitting your loan into more than one loan account—one could be fixed rate, the other, variable.

Stamp duty

Stamp duty is a tax you pay to the state or territory government when a property is sold.

Term

The length of your loan—usually 15, 20 or 30 years.

Valuation

The value of your property as determined by a bank, real estate agent, or independent valuer.

Variable interest rate

Where your loan's interest rate can move up or down. Your minimum repayments might increase if this happens.