Send an Enquiry

Glossary of Financial Terms

Giving our clients an unfair advantage whilst delivering personalised service.

A Terms

AAAPR

The average annual percentage rate (AAPR) wraps up interest payments and fees and expresses all these costs in one rate. It is designed to reflect the total annual cost to a borrower of a loan. All lenders must disclose this benchmark rate in their advertising of home loans and personal loans from July 2003. In Australia, the AAPR is officially called the 'Comparison Rate'.

Accrued Interest

Interest calculated and added to the interest amount payable, but which is not yet paid.

Amortisation

Scheduled repayment of a loan through regular instalments over a period of time (e.g. weekly, fortnightly or monthly repayments over a 30 year term). The borrower pays the interest and part of the principal in each repayment. Contrast to "Interest Only Loan".

Application Fees

Fees that Lenders charge to consider a loan application. These are paid up front and are usually not refundable unless the loan is refused.

Arrears

The total of overdue loan repayments.

Assets

Real estate, securities, cash and other goods owned by individuals.

B Terms

Basic or 'No Frills' Loans

Many lenders offer a class of home loan which has a lower variable interest rate than their standard variable rate loan. The trade off is that these discount loans generally have less flexibility and fewer features, eg. no extra repayments can be made, the repayment level cannot be varied or no redraw is available.

Basic Rate

Applied to loans commonly called 'No Frills Loans' which are generally cheaper than Standard Variable Rate Loans but do not have features such as a redraw facility or mortgage offset.

Break Costs

Relates to the penalty fees charged when a borrower terminates a fixed-rate loan contract before the expiry of the fixed-rate period.

Bridging Finance

A short term Loan that covers a financial gap between the purchase of a property and the sale of a current property.

C Terms

Capped Rate Loan

A Loan where the interest rate is guaranteed not to exceed a stated rate for a fixed period of time. The interest rate can fall.

Certificate of Compliance

A certificate issued by Council (for a fee) confirming that all buildings on the land comply with Council's building regulations.

Certificate of Title

A certificate issued by a government body that describes a title reference to a particular parcel of land, the registered owner of that land and any encumbrances (such as a mortgage) registered against the title.

Community Title

A property title where several dwellings are erected on an estate, where the owners have access to a community club house, swimming pool, barbecue area, tennis court etc. The owners have to pay levies for upkeep on the community facilities.

Company Title

A type of ownership for a unit/flat/apartment in a building that is owned by a company. A purchaser of a unit/flat/apartment buys particular shares in the company which gives the purchaser the right to occupy the unit/flat/apartment. Lenders are generally not enthusiastic about lending on company title properties.

Comparison Rate

All lenders must disclose a benchmark comparison rate in their advertising of home loans and personal loans since July 2003. This Comparison Rate is designed to reflect the total annual cost to a borrower of a loan. It wraps up interest payments and fees and expresses all these costs in one rate, or the average annual percentage rate (AAPR). Home loan Comparison Rates are based on a loan amount of $150,000 and a term of 25 years. Personal loan Comparison Rates vary depending on the rate type and term:
  • Variable – Comparison rates based on $30,000 over 5 years
  • 1 Yr Fixed – Comparison rates based on $1,500 over 1 year
  • 2 Yrs Fixed – Comparison rates based on $5,000 over 2 years
  • 3 Yrs Fixed – Comparison rates based on $10,000 over 3 years
  • 4 Yrs Fixed – Comparison rates based on $20,000 over 4 years
  • 5 Yrs Fixed – Comparison rates based on $30,000 over 5 years
  • 6 Yrs Fixed – Comparison rates based on $40,000 over 6 years
  • 7 Yrs Fixed – Comparison rates based on $50,000 over 7 years
Full comparison rate schedules giving rates based on a variety of amounts and terms are available from the lenders.

Covenant

Imposes conditions on the use of, or the nature of the dwellings erected on, a parcel of land.

Credit Bureau

An organisation to which Lenders subscribe that holds credit information on individuals. For a fee, it is possible to obtain a listing that details your credit history.

D Terms

DSR – Debt Service Ratio

Maximum of the applicants weekly, fortnightly or monthly wage which will support loan repayments over the agreed loan term. Usually expressed as a percentage – most lenders set a maximum DSR between 30% and 33%.

E Terms

Equity

The amount of an asset not subject to any Lender's interest e.g. property worth $300,000, with a mortgage loan of $150,000 – equity is $150,000.

Equity Loan (or Line of Credit)

A loan usually secured by the proportion of the home in which one has equity. It usually operates like an overdraft, where the borrower has a set credit limit to which they can draw funds.

Establishment Fee

Also called Application Fee. Fee which covers basic costs in setting up loan from initial interview to loan drawdown. Some lenders choose to absorb this fee.

Exit Fee

Fee imposed by some lenders where the borrower has sought refinance with another lender within the first few years of the loan.

F Terms

Fixed Interest

An interest rate set for a fixed term. Penalties may apply if the loan is paid out before the term expires.

G Terms

Garnishee

To legally divert whole or part of someone's money to another party.

H Terms

Home Equity Loan

A home equity account gives you a revolving line of credit secured by the value of your house. This allows you to use the funds for any other purpose such as the purchase of a second property, shares or other investments. The interest rate is generally higher than a standard variable rate, and these accounts are not suitable for everyone.

Honeymoon Rates

"Honeymoon" or introductory rates are offered to entice borrowers with a low advertised rate that may be up to 2 percentage points below the standard home loan rate and therefore look very attractive. The rate can be fixed, capped or variable for the first six to 12 months of the loan. Then they automatically revert to the standard rate offered by that lender. Use the 'comparison rate' to help choose and compare loans, not the intro rate.

I Terms

Interest Only Loan

A loan where the principal is repaid at the end of the loan term and interest only is repaid during the term of the loan. These loans are usually short term, say 1 to 5 years.

J Terms

Joint Tenants

Where more than one person is the owner of the property. If one person dies, then the title reverts to the survivor(s), irrespective of the deceased's will. Refer also to "Tenants in Common".

L Terms

Legal Fee

May be charged where an outside party is used to prepare bank documentation.

Liabilities

A person's debts. There are also "Contingent Liabilities", which are Liabilities that are contingent on something happening e.g. where a guarantee is acted upon through a loan default. In other words, the liability may or may not come into effect.

Loan Stamp Duty

The State Government's stamp duty on the mortgage taken to secure a loan. Also referred to as "Mortgage Stamp Duty". Some States offer exemptions on this for first home buyers.

Loan to Value Ratio (LVR)

Refers to the maximum amount lenders will approve against the value of any property taken as security for your home loan. For example if you wish to purchase a property worth $100,000 the lender may approve a loan for 80% of the property value. It will then be up to you to provide the remaining 20% plus costs (mortgage registration and stamp duty etc).

M Terms

Mortgagee

The party taking a mortgage over land, usually to secure a loan.

Mortgage Insurance (MGI)

Some lenders may provide up to 95% of funds for a loan if you agree to take out mortgage insurance (MGI). This figure is a one off payment usually made at the time of settlement. The figure is not easy to calculate being based on variables such as the loan amount, the value of your property and the exact LVR (i.e. the figure between 80% & 95%). This payment allows the lender to recoup the unpaid principal in the event of default and the borrowers debt is transferred to the Mortgage Insurer.

Mortgagor

The party granting a mortgage over land, usually to enable borrowing from a Lender.

N Terms

Negative Gearing

Where the income earned from an investment is less than the costs associated with obtaining and maintaining the investment. The "loss" can be deducted from taxable income.

Non-conforming Loans

So called 'non-conforming' finance refers to loans that cater for those who can't meet the standard income verification and credit history criteria mainstream lenders like banks and mortgage originators use for ordinary borrowers. Such borrowers include those who are self-employed, have a poor credit record or who have recently arrived in Australia. Non-conforming loans are usually at higher interest rates to reflect higher risk of these borrowers. Non-conforming finance is also called 'sub-prime lending'.

O Terms

Official Cash Rate

The Official Cash Rate is the interest rate set by the Reserve Bank of Australia and used to influence the general level of interest rates in banking and the economy. Changes to the cash rate, also termed "official interest rates", flow on to variable home loan, personal loan and credit card rates within weeks.

Offset Account / Mortgage Offset

Offset accounts can help reduce your tax bill by offsetting taxable income from deposit accounts against interest paid in after tax dollars on mortgage repayments. However, not all offset accounts are equal, with many not paying the same interest as you are charged on your mortgage.

Old System Title

Under "Old System", there is a separate deed prepared and executed each time property is transferred or a mortgage is taken etc. If one transaction is missing, the ownership can revert to a previous owner. A complex title system, with heavy associated legal costs. Less than 5% of land remains under Old System Title.

Overdraft

A prearranged limit to which a person can exceed the account balance. Usually used for business purposes.

P Terms

Portable Loans / Portability

A portable loan allows you to sell your house and move to a new one without having to refinance. This saves application and legal fees. Most lenders however insist that the loan amount is the same or less. Make sure you know the terms of your loan.

Principal

The capital sum borrowed.

Principal & Interest

A loan where both the principal and interest are repaid together on a regular basis, mostly by monthly instalments (P&I).

R Terms

Redraw Facility

A redraw facility allows you to make additional repayments on your mortgage, and then have access to the additional repayments if you need to. Make sure you understand the conditions attached to the redraw facility that can include a minimum amount and a fee every time you use it.

S Terms

Search (Title Search)

A request to the Lands Title Office to ascertain who owns a specified land and what encumbrances are on the title.

Security

An asset that protects a Lender's risk until the loan is fully repaid. Usually property, such as real estate, is offered as security.

Service Fee

Usually a monthly fee levied to cover bank cost of administering & maintaining the loan account i.e. fixed and variable costs such as staff, IT software / hardware.

Settlement Date

Date on which the new owner finalises payment and assumes possession of land. Sometimes called the "Drawdown" date, as this is the date the loan is usually fully drawn.

Stamp Duty on Transfer

State Government tax assessed on the sale price of the property. First home buyers may be eligible for concessions on this.

Standard Variable Rate

The rate which lenders apply to their 'premium' home loan product. Carries features such as a redraw facility, portability, salary account and mortgage offset.

Strata Title

Similar to Torrens Title, but usually over units. With Torrens title, the land is owned plus everything thereon. With Strata Title, only a particular unit is owned.

Sub-prime Lending

'Sub-prime lending', also called 'non-conforming' loans, refers to loans that cater for those who can't meet the standard income verification and credit history criteria mainstream lenders like banks and mortgage originators use for ordinary borrowers. Such borrowers include those who are self-employed, have a poor credit record or who have recently arrived in Australia. Non-conforming loans are usually at higher interest rates to reflect higher risk of these borrowers.

Survey

A plan that shows the boundaries and the building position on a block of land.

Switching Fee

The lender may impose a switching fee where an existing borrower wishes to change from one loan type to another e.g. Variable Rate Loan to Fixed Rate Loan.

T Terms

Tenants in Common

Where more than one person is the owner of the property. Each owner has a nominated share of ownership, such as 25% each.

Torrens Title

Torrens Title is the most common form of property title in Australia. All previous and current owners are listed on the one deed, as are all previous mortgagees etc. Also known as "RPA" standing for "Real Property Act", the legislation that governs the operation of Torrens Title.

U Terms

Uniform Consumer Credit Code (UCCC)

The Uniform Consumer Credit Code is legislation to ensure uniformity amongst all credit providers across all Australian states. For example, all loan contracts must now adhere to a uniform format as specified by the act. It must set out all fees and charges that the borrower (and, if required, guarantor) are liable for under the loan contract.

V Terms

Valuation

A report giving a professional opinion on the value of property. A valuation obtained for one Lender is NOT suitable for another Lender, as each valuation has an indemnity clause that protects the specific Lender. Valuations can take several days, as the Valuer may need access to the dwelling, so appointments with current owners/renters are necessary. This can slow the process. Some Lenders may not require formal valuations, subject to certain conditions.

Variable Interest Rate

An interest rate that varies during the term of the loan, in accordance with market forces.

Z Terms

Zone Certificates

A Certificate that confirms the local government authority guidelines as to the permitted uses of the land.
Property Insights

Latest from the Blog

View All Articles →
logo
Award-winning mortgage broker for smart property buyers and investors. Australia-wide service since 2005.

Services
Property Insights
Company
logo
Ph: 1800 46 48 10
Fax: 1800 46 48 41
© 2026 Investors Choice Mortgages. All rights reserved.