Home Loan Jargon
When applying for a Mortgage in Australia, you will likely encounter jargon. In the banking and finance landscape we often use jargon as a way to speak. We’ve provided a quick break down of what some of the banking jargon means for you
LMI - Lenders Mortgage Insurance (also known as Low Deposit Premium LDP)
CCR - Consumer Credit Reporting - The report which outlines your overall score of credit worthiness based on your historical financial behaviour.
LVR - Loan to Value Ratio - How much equity you have vs the Loan Amount. You can work this out by simply dividing your Loan Amount owing by the Value of the Property
Mortgage - The amount of money advanced to you by your lender, how much you owe
Title - The official document that explains who has ownership and an interest in a said property
Interest Rate Margin - Banks often have a base rate and offer either reduced or added margins depending on the overall client risk. The margin is the discount or additional amount you will pay depending on your risk profile.
RBA - Often referred to as the RBA, known as the Reserve Bank of Australia
Ammortisation - The amount you are repaying (net of interest and fees) the total amount you are reducing your mortgage balance by
Offset - A seperate account that can either offset your interest payment either in full or partially depending on your lender and loan type
Redraw - Your physical home loan account number, which may be set as a redraw as well. When additional monies are paid above the required amount, if you have selected to have redraw you may be able to access these prepaid funds, known as redraw.
Equity - The amount available you may have to access, worked out by calculating your LVR
APR - Annual Percentage Rate
Bridging Loan - A loan type that some lenders offer, to assist in bridging the gap between purchasing a new home and selling an old home.
Additional Repayments - Paying above and beyond the contracted repayment amount.
Cash Back - Some lenders may offer incentives to move to their bank, in the way of cash back.
Valuation - An independent valuation undertaken to determine the value of a home. There are a few different types of Valuations available (Short Form - A valuer physically inspects your home, AVM and Desktop - Online Valuations conducted by banks using information available online to them)
Lender - The Bank whom is lending you the money
Borrower - The person or entity borrowing funds from a lender
Refinance - Changing from one lender to another
Investment Loan - A loan for a home you’re not living in.
Now that you've got the jargon sorted, it's worth seeing how some of these terms actually play out in real applications. LVR and LMI, for instance, were the exact numbers that shifted the outcome for a family we helped recently with HECS debt and their home loan. If you're just starting out, our First Home Buyers page breaks down what all this means for your situation specifically, and if a Bridging Loan is one of the terms that caught your eye, The Gap Loan page goes into exactly how that works.
Still feels like a foreign language? That's what we're here for. Make an Appointment and we'll translate it for your specific circumstances.
