FINANCIAL DICTIONARY

AAPR, Comparison rate or Real Rate of loan

Three ways of saying the same thing. The Average Annual Percentage Rate (AAPR), Comparison Rate and the Real Rate refer to interest rates plus fees and charges rolled into a single percentage rate for ease of comparison.

Amortizing Loan

The most commonly used loan which requires set repayments of principal and interest over a period of time.

Breakcost

Fees charged by your lender if you exit your loan early

Bridging Finance

Helps you to "bridge" the gap between the sale of one property and the purchase of another.

Capped or Tunnel Loans

Capped limits only how high the loan rate can go while Tunnel limits both how high and low a rate can go.

Conveyancing

Legal fees on a property purchase are called conveyancing fees.

Deposit

The amount of cash you need to contribute towards your home loan application.

Fixed Rate Loan

Interest rates that are locked in for a certain period of time.

Interest Capitalisation

Rare in personal lending because no interest or principal repayments are required. Find out more Interest Only No principal repayments are required - only the interest portion.

Introductory or Honeymoon Rate Loan

So named because they give you a low rate honeymoon period before they revert to the reality of a 30-year marriage.

Loan to Value Ratio (LVR)

The percentage of the total loan the institution will lend you.

Mortgage Offset

This is a way of paying off your mortgage quicker by attaching your everyday account to the loan and using the balance to reduce interest.

Mortgage Insurance

Mortgage insurance safeguards the lender in case of borrower default.

Ongoing Fees

Ongoing fees are those charged periodically over the life of the loan.

Overdraft

An overdraft is a loan that does not need to be paid off in regular, structured repayments.

Parental Leave

A short break from loan repayments allowed by some lenders due to parenthood.

Portability

Portability means simply that you can pick up your loan and take it with you when you move houses.

Progressive Drawdown

When building a home rather than buying, funds can be accessed in small lump sums at various intervals to suit the building process.

Redraw

Pay extra money into your loan and withdraw it back if you need it in the future.

Refinancing

Refinancing simply means taking out a new loan to pay out an old one.

Repayment Holidays

Proven hardship such as an unexpected loss of income can give you a temporary "holiday" from loan repayments.

Revolving Line of Credit

This is essentially a giant overdraft where money paid in can be withdrawn again.

Salary Loan

What would you call a loan that your salary could be paid directly into?

Split Loans

Dividing your loan into one-part fixed and one-part variable interest rates gives you the best of both world.

Stamp Duty

Stamp Duty is a State Government duty on financial and some other transactions.

Switching Fees

Moving from one loan type to another during the term of a loan often incurs a switching fee.

Upfront Fees

These are charged by a lender to process your loan application.

Variable Rate Loan

Also know as a standard variable loan, it fluctuates with money market movements.

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