I get asked to translate the same dozen or so terms more often than almost anything else in this job. Most lending jargon isn’t complicated once someone actually explains it — it’s just never explained. This page is the plain-English version, grouped the way these terms actually come up in a real conversation, with a note on where regional NSW and ACT buyers hit something a city guide won’t mention.
Getting Ready to Buy
Genuine Savings
Genuine savings means money you’ve accumulated yourself over at least three months — regular pay deposits, a savings account building up, term deposits — as opposed to a lump sum that just appeared (a gift, an inheritance, a bonus). Lenders ask for it because it’s evidence you can actually maintain loan repayments, not just that you have money today. In regional areas where first-home buyers are more likely to get help from family, this catches people out — a genuine gift toward a deposit is fine, but it needs to be documented as a gift, not disguised as savings.
First Home Owner Grant (FHOG)
A one-off payment from the state government to eligible first-home buyers, usually for a new or substantially renovated home under a set price cap. The amount and eligibility rules vary by state and change periodically, so I always tell clients to check the current NSW or ACT scheme rules directly rather than rely on what a friend was told last year — these details date quickly.
Stamp Duty
A state government tax charged on the purchase of property, calculated as a percentage of the purchase price (or sometimes the market value, whichever is higher), payable at or shortly after settlement. Rates and concessions differ between NSW and the ACT, and first-home buyers often qualify for a discount or exemption below a certain price threshold — always confirm current thresholds with your solicitor or the relevant state revenue office, as they change from time to time.
Rates and Loan Structure
LVR (Loan-to-Value Ratio)
The loan amount as a percentage of the property’s value. An $560,000 loan on a $700,000 property is 80% LVR. It’s the single number that decides whether you’ll need Lenders Mortgage Insurance, and it shifts the moment the valuation comes back different from the contract price — which happens more often on regional properties than city ones.
LMI (Lenders Mortgage Insurance)
A one-off, usually substantial premium charged when your LVR is above 80%, protecting the lender (not you) if you default. It’s calculated on the loan amount and LVR band, and it can typically be added to the loan rather than paid upfront. People sometimes think a bigger deposit is “optional” — LMI is the actual cost of skipping that extra saving time.
Cash Rate (RBA)
The interest rate the Reserve Bank of Australia sets for overnight lending between banks, reviewed at scheduled meetings through the year. It’s the main lever behind variable rate movements — when it moves, most variable home loan rates follow within weeks, though not always by the same amount or on the same day. It’s not the same as the rate you’re actually paying; that’s your own lender’s rate, set with reference to the cash rate but not locked to it.
Comparison Rate
The interest rate plus most fees and charges, expressed as a single percentage, designed to let you compare two loans on a like-for-like basis. It’s genuinely useful for comparing two otherwise similar products from different lenders, but it assumes a standard loan amount and term, so it can be misleading if your situation doesn’t match that assumption.
Offset Account
A transaction account linked to your home loan where the balance is subtracted from the loan balance before interest is calculated — so $20,000 sitting in offset against a $500,000 loan means you only pay interest on $480,000, while the money stays fully accessible. Different from redraw in one important way: offset money is yours, sitting in your own account; redraw is money you’ve already paid into the loan that the lender lets you take back out.
Redraw Facility
Extra repayments you’ve made above the minimum, which you can withdraw again if needed. Unlike offset, that money has actually gone into reducing the loan — accessing it again usually involves a request to the lender, sometimes with a fee or a minimum amount, and it isn’t always instant. Worth knowing before you assume it works exactly like a bank account.
Fixed vs Variable Rate
A fixed rate locks your interest rate for a set period (commonly 1–5 years), so repayments don’t move even if the cash rate does — but you usually lose flexibility (extra repayment caps, break costs if you exit early). A variable rate moves with the lender’s rate changes, which usually tracks the RBA cash rate over time, and comes with full flexibility — offset, unlimited extra repayments, easy refinancing. Plenty of loans split the two.
Rate Lock
A fee-based option to lock in a fixed rate for a set period (often 60–90 days) between applying and settlement, protecting you if rates rise before your loan settles. Without it, if you’ve selected a fixed rate but rates move before settlement, you can end up settling at a different fixed rate than the one you were originally quoted.
Principal & Interest vs Interest-Only
Principal & interest repayments pay down both the loan balance and the interest charged, so the loan actually reduces over time. Interest-only repayments only cover the interest for a set period (commonly up to 5 years), keeping repayments lower short-term but not reducing the debt at all during that period — worth understanding fully before choosing it, especially for an owner-occupied home rather than an investment property.
Break Costs
A fee charged if you exit or significantly change a fixed-rate loan before the fixed term ends, calculated based on the difference between your fixed rate and current market rates. They can be small or genuinely large depending on how rates have moved since you fixed — always worth asking your lender for an actual figure before assuming you can simply refinance out of a fixed loan.
Approval, Valuation, and Settlement
Serviceability
The lender’s assessment of whether your income can comfortably cover this loan’s repayments plus your other expenses and debts, usually tested at a higher “buffer” rate than the actual rate you’ll pay (see APRA Serviceability Buffer below). This is where I see more genuine surprises than anywhere else in the process — a borrowing capacity someone assumed based on their pay alone often doesn’t hold once real living expenses and existing commitments are properly counted.
APRA Serviceability Buffer
A regulatory requirement that lenders test your ability to repay a loan at a rate several percentage points above the actual rate you’re being offered — a safety margin against future rate rises. It’s why your approved borrowing amount can feel lower than a simple back-of-envelope calculation would suggest, and it’s the same rule for every lender, not something you can shop around to avoid.
Pre-Approval
An early, indicative assessment of how much you’re likely able to borrow, based on a lender’s initial look at your income, expenses, and credit file — before you’ve found a specific property. It’s a genuinely useful guide for house-hunting, but it isn’t a guarantee: the real assessment happens at conditional approval, once there’s an actual property and a full application to assess against.
Conditional vs Unconditional Approval
Conditional approval means the lender has assessed your situation and is willing to lend, subject to conditions still being met (a satisfactory valuation, updated payslips, and so on). Unconditional approval means every condition has cleared and the loan is formally locked in. The gap between the two is where most of the genuine anxiety in a home loan sits — and where communication from your lender matters most.
Valuation Shortfall
When the bank’s valuation of the property comes in lower than the contract price, meaning your actual LVR is higher than planned and you may need a larger deposit or LMI you weren’t expecting. This happens more often on regional and rural properties, where there are fewer recent comparable sales for a valuer to work from, and I always flag it as a real possibility upfront rather than a rare edge case.
Guarantor / Family Guarantee Loan
An arrangement where a family member (usually a parent) offers equity in their own property as additional security, letting a buyer borrow with a smaller deposit or avoid LMI. It’s a genuine and common path for regional first-home buyers whose own deposit isn’t quite there yet, but it puts the guarantor’s property on the line too, and every party needs to properly understand that before signing anything.
Cooling-Off Period
A short period after signing a property contract (rules vary by state — in NSW it’s typically 5 business days, in the ACT arrangements differ) during which a buyer can withdraw, usually subject to a small penalty. It’s not the same as finance approval — don’t assume you’re automatically protected if your loan falls through after this period ends.
Settlement
The day ownership formally transfers — funds move from your lender to the seller (via your solicitor or conveyancer), the mortgage is registered, and you get the keys. Everything before this point is preparation; this is the day the loan itself actually begins.
After You’ve Bought
Equity
The difference between what your property is worth and what you still owe on it. Equity grows both from paying down the loan and from property value increasing — and it’s what most people draw on later to renovate, invest, or help their own kids into a first home.
Negative Gearing
When an investment property’s costs (loan interest, rates, maintenance) exceed the rental income it earns, creating a loss that can be offset against your other taxable income. It’s a genuine feature of the tax system, not a loophole, but it only makes sense as part of a wider strategy — a property that loses money every year needs a real plan for how and when that changes, not just a tax deduction.
Land Tax
An annual state government tax on the value of land you own above a threshold, separate from council rates — it generally doesn’t apply to your own home (principal place of residence) but does apply to investment properties and vacant land above the threshold. Thresholds and rates differ between NSW and the ACT and change periodically, so check current settings before assuming an investment property is exempt.
Body Corporate / Strata Fees
Regular fees paid by owners in a unit, townhouse, or apartment complex to cover shared building costs — building insurance, common area maintenance, and a sinking fund for larger future repairs. They’re a genuine ongoing cost that affects serviceability, and I always make sure a client factors the full strata fee into their budget, not just the mortgage repayment, especially in older regional unit blocks where a special levy for unexpected repairs is a real possibility.
Discharge of Mortgage
The formal process of removing a lender’s claim over a property once a loan is fully repaid or refinanced elsewhere — it doesn’t happen automatically the moment the balance hits zero, and there’s usually a discharge fee and some paperwork involved.
Loan Portability
The ability to move your existing home loan to a new property without fully refinancing — useful if you’re upgrading or relocating within the same lending arrangement, though it still typically involves a new valuation and approval process for the new property.
Comprehensive Credit Reporting
The current credit reporting standard in Australia, where your credit file shows an ongoing repayment history (on-time or missed payments) across your accounts, not just a record of applications and defaults. It means a consistently good repayment history genuinely helps your credit profile over time — it isn’t just a file that only records the bad news.
Got a term you’ve heard and never had explained properly? Get in touch and I’ll add it here.
