JargonBuster
If you thought Amortizing was a French flick or Progressive Drawdown a B-grade western, you need help to talk the talk.
Our JargonBuster 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.
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Amortizing Loan
The most commonly used loan which requires set repayments of principal
and interest over a period of time.
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Breakcost
Fees charged by your lender if you exit your loan early.
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Bridging Finance
Helps you to "bridge" the gap between the sale of one property and the
purchase of another
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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.
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Conveyancing
Legal fees on a property purchase are called conveyancing fees.
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Deposit
The amount of cash you need to contribute towards your home loan
application.
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Fixed Rate Loans
Interest rates that are locked in for a certain period of time.
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Interest Capitalisation
Rare in personal lending because no interest or principal repayments
are required.
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Interest Only No principal repayments are required - only the interest
portion.
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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.
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Loan to Value Ratio (LVR)
The percentage of the total loan the institution will lend you.
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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.
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Mortgage Insurance
Mortgage insurance safeguards the lender in case of borrower default.
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Ongoing Fees
Ongoing fees are those charged periodically over the life of the loan.
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Overdraft
An overdraft is a loan that does not need to be paid off in regular,
structured repayments.
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Parental Leave
A short break from loan repayments allowed by some lenders due to
parenthood.
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Portability
Portability means simply that you can pick up your loan and take it
with you when you move houses.
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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.
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Redraw
Pay extra money into your loan and withdraw it back if you need it in
the future.
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Refinancing
Refinancing simply means taking out a new loan to pay out an old one.
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Repayment Holidays
Proven hardship such as an unexpected loss of income can give you a
temporary "holiday" from loan repayments.
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Revolving Line of Credit
This is essentially a giant overdraft where money paid in can be
withdrawn again.
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Salary Loan
What would you call a loan that your salary could be paid directly
into?
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Split Loans
Dividing your loan into one-part fixed and one-part variable interest
rates gives you the best of both world.
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Stamp Duty
Stamp Duty is a State Government duty on financial and some other
transactions.
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Switching Fees
Moving from one loan type to another during the term of a loan often
incurs a switching fee.
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Upfront Fees
These are charged by a lender to process your loan application.
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Variable Rate Loan
Also know as a standard variable loan, it fluctuates with money market
movements.
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