If you thought Amortizing was a French flick or Progressive Drawdown a B-grade western, you need help to talk the talk. Our financial dictionary below demystifies financial terms used in the home loan trade.
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.
The most commonly used loan which requires set repayments of principal and interest over a period of time.
Fees charged by your lender if you exit your loan early
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.
Legal fees on a property purchase are called conveyancing fees.
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.
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 insurance safeguards the lender in case of borrower default.
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.
Ongoing fees are those charged periodically over the life of the loan.
An overdraft is a loan that does not need to be paid off in regular, structured repayments.
A short break from loan repayments allowed by some lenders due to parenthood.
Portability means simply that you can pick up your loan and take it with you when you move houses.
When building a home rather than buying, funds can be accessed in small lump sums at various intervals to suit the building process.
Pay extra money into your loan and withdraw it back if you need it in the future.
Refinancing simply means taking out a new loan to pay out an old one.
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.
What would you call a loan that your salary could be paid directly into?
Dividing your loan into one-part fixed and one-part variable interest rates gives you the best of both world.
Stamp Duty is a State Government duty on financial and some other transactions.
CANSTAR star ratings are a consumer-friendly benchmark that help you compare financial products based on their rates and features. Get more information about Star Ratings here.
Moving from one loan type to another during the term of a loan often incurs a switching fee.
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