Navigating the world of finance and mortgages can be intimidating, filled with jargon, terms and acronyms that seem like a foreign language. But in today’s rapidly evolving economic landscape, understanding financial and mortgage jargon is more important than ever. Whether you're a seasoned investor, a first home buyer, or someone looking to make sense of personal finance, here’s some help demystifying the terminology that can leave you feeling overwhelmed.
AFCA
The Australian Financial Complaints Authority is an unbiased body providing consumers and small businesses with fair, free and independent dispute resolution for financial complaints.
APRA
The Australian Prudential Regulation Authority is an unbiased body overseeing banks, credit unions, building societies, general insurance and reinsurance companies, life insurance, friendly societies and most members of the superannuation industry.
Certificate of title
A document of ownership providing a description of the land, proprietorship, and registered interests such as a mortgage, charges or caveats, and any restrictive covenants or easements which affect the estate.
Credit Record and Credit Scores
A record of your repayment history on loans, credit cards and other credit products that is kept on file by a credit agency for up to 7 years. A good credit history is essential for accessing affordable finance in the form of mortgages and loans, as lenders use your credit score to determine whether or not to approve loan applications.
Equity
Equity is the value of the property over and above the amount you owe on your loan. In other words, how much your property is worth less what you owe on it. You may be able to use your equity to buy another property, consolidate your debt, or to pay for a renovation.
First Home Owners Grant
A one-off grant with different qualifying regulations in each state and territory available to Australians for the purchase of their first home.
Fixed Interest Rate
An interest rate that locks in your monthly repayments at a set rate for a set period of time, suits buyers who want certainty around budgeting.
Lenders Mortgage Insurance (LMI)
An amount paid to the lender to protect them in case you default on your repayments if your deposit is lower than 20 per cent of the property value.
Loan-to-Value Ratio (LVR)
Expressed as a percentage, LVR refers to the amount borrowed in the loan against the value of the property purchased.
Loan Agreement
A formal contract between the borrower and lender setting out the terms and conditions of the loan.
Mortgage Protection Insurance
Insurance that covers your loan repayments should you fall ill, suffer an injury, or lose your job and be unable to repay your loan.
Negative Gearing
Refers to borrowing money to invest where the return on investment is less than the borrowing costs.
Off-The-Plan
Buying a property that hasn't been built yet or is still under construction, based on building and design plans.
Principal
The outstanding balance owing on your loan on which interest is typically calculated and charged.
Non-Bank Lenders
Lenders that do not hold an Australian banking licence and do not represent a mutual bank, building society or a credit union.
Pre-Approval
A provisional confirmation from a lender that a loan is available when the borrower is ready to use it to buy a property.
Refinancing
Refers to acquiring a new loan to take over an older one for the same asset.
Security
Refers to the asset a lender can claim against if you default on your loan. For home loans, security is usually the property being purchased.
Serviceability
Your capacity to meet loan repayments based on your income and expenses.
Split Loans
Fixing part of your mortgage on a fixed interest rate and the rest on a variable interest rate all under one loan product.
Stamp Duty
A tax that state and territory governments charge for certain documents and transactions including mortgages.
Redraw Facility
An optional feature on certain home loans that allows access to any additional repayments made on your home loan.
Revolving Credit or Line of Credit
A flexible loan arrangement that allows you to borrow within a specified and agreed credit limit to use for everyday transactions. Interest is added to the loan each month, and repayments are not necessary while the loan is within its credit limit.
Variable Interest Rate
Interest charged on the outstanding balance of your loan may increase or decrease in accordance with interest rate movements.
At Mortgage Express, our mortgage brokers know that navigating the world of finance and mortgages can feel overwhelming at times. That’s why we work hard to make things as easy to understand as we can. We’re experts at simplifying property buying processes, and guiding our clients every step of the way. If you’d like help navigating the mortgage maze, get in touch today.
While all care has been taken in the preparation of this publication, no warranty is given as to the accuracy of the information and no responsibility is taken by Finservice Pty Ltd (Mortgage Express) for any errors or omissions. This publication does not constitute personalised financial advice. It may not be relevant to individual circumstances. Nothing in this publication is, or should be taken as, an offer, invitation, or recommendation to buy, sell, or retain any investment in or make any deposit with any person. You should seek professional advice before taking any action in relation to the matters dealt within this publication. A Disclosure Statement is available on request and free of charge.
Finservice Pty Ltd (Mortgage Express) is authorised as a corporate credit representative (Corporate Credit Representative Number 397386) to engage in credit activities on behalf of BLSSA Pty Ltd (Australian Credit Licence number 391237) ACN 123 600 000 | Full member of MFAA | Member of Australian Financial Complaints Authority (AFCA) | Member of Choice Aggregation Services.
