Common Terms & Abbreviations




This stands for the Average Annual Percentage Rate. It’s a term we use to describe the “true rate” of a loan. We use the AAPR when we rank loans. We use it to work out the real cost of a loan, because it takes into account honeymoon rates, ongoing fees, introductory offers and discharge fees as well as the advertised interest rate. The AAPR calculation is based on the actual loan amount and how much is charged for it over a 7 year period. The AAPR doesn’t include government fees, exit or early repayment fees and service fees like redraw and internet usage charges.


To agree to the terms and conditions of an offer contract.

Additional Repayment

Additional funds paid off your loan which exceed the minimum monthly repayments.


Someone who acts on behalf of another person or organisation. For example, a real estate agent acts on behalf of a landlord or owner when leasing or selling a property.

Amortisation period

Also known as the loan term. It’s the agreed length of time that a borrower has to repay a loan. It’s set during the application and approval process.


To pay off principal and interest under a loan over a period of time.

Application fee

Fee charged to cover or partially cover the lender’s internal costs of considering a loan application. Also referred to as an establishment fee by some lenders. The fees are sometimes required to be paid upfront and are not usually refundable unless the loan is refused.

Appraised value

The estimated value of a property being used as security for a loan.


The increase in the value of a property.


An outstanding or overdue amount, overdue payments which are due to be paid


Money, property or goods owned. A list of what an individual currently owns, such as real estate, savings accounts, cars, home contents, superannuation, shares etc.


A public sale where a property is sold to the highest bidder.



Balance Sheet

A financial statement confirming assets, liabilities and capital.

Balloon Payment

A final payment finalising a debt in which the amount paid is substantially more than previous instalments.

Basic variable rate loan

A loan which has an interest rate that varies according to market forces. The interest rate charged is lower than a standard variable rate loan but the loan may have fewer features.

Body corporate

All the unit owners within a strata building. The owners elect a council responsible for the management of the building and it’s common areas.


An entity or person/s borrowing money.

Breach of contract

Breaking the conditions of a contract.

Break costs

Costs incurred when a fixed rate loan is paid off before the end of the fixed rate period, or when additional payments are made in advance.

Bridging finance

A short term loan that covers a financial gap between the purchase of a new property and the sale of a currently owned property.

Building inspection

An inspection generally carried out prior to the purchase of a property to ensure the building is structurally sound. Contracts of sale can be made subject to the satisfactory building inspection.

Building regulations

Legal or statutory rules set up by a local council to control the manner and quality of buildings in it’s jurisdiction. The rules are generally designed to ensure public health and safety as well as acceptable standards of construction.

Building society

A financial institution owned by its customers or “members”. It offers banking and other financial services, especially mortgage lending.



Capital gain

The financial or monetary gain obtained when an asset is sold for more than its original price.

Capital gains tax

A federal tax on the monetary gain made on the sale of an asset bought after September 1985. The tax does not apply to the gains made on the sale of an owner-occupied residence, so it generally applies only to investment properties.


The current value of your assets. Eg Property, Cash, vehicles etc.

Capped loan

A loan where the interest rate is set so that it may reduce, but not exceed a certain level over an agreed period of time.

Cash Flow

In relation to company accounts, reported net income plus amounts charged off for depreciation, amortisation and extraordinary charges to reserves.


A caveat lodged upon a land or property title indicates that a party, that is not the owner, claims some right over or interest in the property.

Certificate of Title

A record of all current information relevant to a particular property or piece of land, inclusive of, current ownership details, any registered encumbrances or caveats and lot or plan details. A lender usually holds this document as security. Once the loan is fully repaid, the Certificate of Title is returned to the borrower.


Chattels are items of personal property, such as clothing, appliances and furniture. In real estate terms chattels are usually movable items which may be included in the sale, such as furniture.

Commercial Property

Property intended for use or occupancy by retail and wholesale businesses (e.g. stores, office buildings, hotels and service establishments).


The fee or payment made to an agent for services. E.g Real Estate Agent

Community title

A property title where several dwellings are erected on an estate and the owners own their property and land on freehold title, but have shared access to community facilities e.g. swimming pool, barbecue area, tennis court etc. All property owners pay levies for upkeep of the community facilities.

Company title

A type of ownership for a unit/flat/apartment in a building that is owned by a company. A purchaser buys particular shares in the company which gives the purchaser the right to occupy a specific unit/flat/apartment. Lenders are generally not enthusiastic about lending on company title properties.

Comparison rate

This is a rate that includes both the interest rate and the upfront and on-going loan fees, expressed as a single percentage.

Consumer Credit Code

The Consumer Credit Code also known as the UCCC is parliamentary legislation which is designed to protect the rights of the consumer by ensuring all lenders adhere to the same rules of lending practice.

Construction loan

A loan specifically for the purpose of funding the building of a new dwelling. Can also apply to major renovations of an existing property.

Contract of Sale

A written agreement outlining the terms and conditions for the purchase or sale of a property.


The transfer of property ownership and changing the title of a property from the seller’s name to the buyer’s name.


A legal process to transfer ownership of property from the seller to the buyer.


The Credit Ombudsman Service Limited.

Cover note

A guarantee of temporary property insurance before the implementation of a formal policy.

Credit Limit

Maximum preset amount a borrower can use on a loan account.

Credit Reference or Credit Report

In order to approve a loan, a lender will require a credit report on the borrower to confirm previous loans applied for or credit difficulties recorded. Credit reports are prepared by authorised credit reporting agencies, such as the Credit Reference Association of Australia. The Lender obtains the borrower’s permission in writing to proceed with a credit report.

Credit union

A cooperative which operates similarly to a bank, but is owned and controlled by people who use its services.


Borrowed money or other finance to be paid back under an arrangement with a lender.


A party who is owed money, be it a person or organisation.


The Comparison Rate schedule which must be made available by each lender to confirm the annual percentage rate and its corresponding Comparions Rate for loan products offered.



Daily Interest

Interest calculated on a daily basis.

Debt Service Ratio

Lenders calculate the Debt Service Ratio by taking into account a borrower’s expenses as a proportion of their income.


A party who owes money to another.


Another word for title. It’s a legal document that states all information regarding the ownership of a property or piece of land.


Failure to abide by the terms of a mortgage or loan agreement, or failure to make a loan repayment by a specified date. Defaulting on a loan may result in financial penalties and, in extreme cases, the mortgage holder taking legal action to repossess the mortgaged property.

Deferred Establishment fee

A penalty which may be charged when a loan is repaid by the borrower in full.

Deposit bond

A substitute for cash deposit that guarantees the purchaser will pay the full purchase amount by the settlement date. Institutions providing deposit bonds act as a guarantor that payment will be made.


An initial cash contribution towards the purchase of the property, usually payable on exchange of contracts.

Direct debit

Regular electronic debiting of funds from a nominated cheque or savings account.


Miscellaneous fees and charges incurred during the conveyancing process, including search fees and charges paid to government authorities.

Discharge Fee

A administration fee imposed by the lender to process the discharge of a loan when it is paid out.

Discharge of Mortgage

A document signed by the lender and given to the borrower when a mortgage loan has been repaid in full.

Disposable income

A person’s remaining income after all known expenses, such as loan payments and bills, have been met.

Draw down

A draw down is the transfer of money from the lender to a borrower after the loan has settled. Alternatively, to access available loan funds. Draw down usually refers to a construction loan, or a line of credit. That is a loan where the limit is set, but the amount is not accessed all at once. The borrower draws down or uses the funds as required, up to the set limit.



Early Repayment Penalty

If a loan is repaid before the end of its term, lenders may charge an early repayment penalty.


A right to use part of the land owned by another person or organisation, for example to access another property.


An outstanding liability or charge on a property.


The amount of a property actually “owned” by the owner. It’s the current value of a property less the amount still owed on its mortgage. Equity usually increases as the principal of the mortgage is paid off. Market values and improvements to the property can also affect equity. E.g. a property worth $500,000 with an outstanding mortgage debt of $150,000 – equity is $350,000.

Equity loan

A loan that uses the equity in your property to borrow for any personal purpose, including personal investment. It usually operates like an overdraft, where the borrower has a set credit limit to which they can draw funds. The term Equity loan can also refer to a Line of Credit loan.

Establishment fee

Fee charged to cover or partially cover the lender’s internal costs of considering a loan application. Also referred to as an establishment fee by some lenders. The fees are sometimes required to be paid upfront and are not usually refundable unless the loan is refused.

Exit or early repayment fees

Penalties charged by some lenders when a loan is paid off before the end of its term.

Extra repayments

These are regular additional repayments on a home loan account, above the minimum required repayment, which can reduce the term of the loan and the interest payable.




A term used to describe a loan account.

First Home Owner Grant (FHOG)

The FHOG scheme is a federal government initiative but is administered by each State or Territory Revenue Office. It was introduced as compensation for the increased cost of housing after implementation of the Goods and Services Tax (GST) on 1 July 2000. It’s only for buyers that have not previously bought property in Australia.


Items not intended to be removed from a property when it’s sold, for example fixed carpets, lights, curtains and stoves.

Fixed interest rate

An interest rate set for a fixed period. At the end of the fixed rate period, most lenders will allow you to fix again at the prevailing rates or revert to their standard variable rate.

Fixed rate

An interest rate that applies to a loan for a set term. Both the interest rate and loan repayments are fixed for the agreed term, regardless of any interest rate variations in the home loan market. The agreed term is usually anywhere between 1 and 5 years generally.


Complete ownership of a property and the land that it’s built on.

Freehold title

The Title document which outlines property ownership where the property and the land it stands on fully belong to the owner.




Occurs when a vendor agrees to sell a property, but then sells it to another party offering a higher price.


Also known as ‘leverage’, gearing is a measure of the debt against the equity (ownership) you have in a property.

Genuine savings

Funds that have been accumulated or held for a certain period of time prior to applying for a loan.

Government Fees

All home loans and purchase of residential property will attract certain government charges at the time of settlement. For example, stamp duty and mortgage duty.

Gross Income

Income before tax, superannuation or payroll deductions.


A contract to pay someone else’s debt if they don’t pay it.


A guarantor is a third party to a loan who is helping the borrower obtain finance by offering additional security support. Guarantors are generally limited to spouses or immediate family members. A guarantor may be liable for the loan debt if the borrower defaults.



Home equity

The amount of a property actually “owned” by the owner. It’s the current value of a property less the amount still owed on its mortgage. Equity usually increases as the principal of the mortgage is paid off and when property market values increase.

Home loan

The funds borrowed to purchase a property. The property acts as security for repayment of the loan. The lender holds the title or deed to the property. It’s also known as a mortgage.

Honeymoon Rate

Some lenders offer a ‘discount’ or introductory rate for a short period of time. At the end of the ‘honeymoon’ period, the interest rate will usually revert to the lender’s standard variable rate.




The regular payment that a borrower agrees to make to a lender.

Interest only loan

A loan where only the interest is paid for an agreed term, usually 1 to 5 years. The principal is then repaid over the remaining term of the loan by the conversion of repayments to principal and interest.

Interest Rate

The rate at which interest is applied.


A lenders charge for the use of borrowed funds, or the return on deposited funds.

Interest Only (IO)

A loan in which only the interest on the principal is repaid with each repayment for a specified period.

Interest Only Loan

Under an interest only loan, usually the borrower makes no principal repayments. The repayments are for the amount of interest only, which has accrued on the loan. These loans are usually for a short period of around 1 to 5 years.

Introductory (honeymoon) rate

A reduced interest rate offered for a specified period of a loan, usually the first twelve months.

Introductory loan

A loan offered to new borrowers at a reduced rate for an introductory period – usually 6 to 12 months. It’s also called a discounted or honeymoon rate.

Investment property

A property purchased for the sole purpose of earning a return, either in the form of rent or capital gain. The owner does not live in the property.



Joint tenants

Equal holding of property between two or more people. If one party dies, their share passes to the survivor/s. A common arrangement for married couples.



Land tax

An annual tax levied by state governments, the rate of which is determined by the assessed valuation.


An agreement between a property owner and a tenant. It allows the tenant to occupy and use a property for a set period in exchange for a set rent.

Lender's Mortgage Insurance (LMI)

A form of insurance taken out by the lender to safeguard against a financial loss in the event of a security being sold due to the loan going into default. It’s usually required for the loans the lender considers more risky. For example, when the amount borrowed is over 80% of the property value. The borrower pays a once-only premium. The insurance covers the lender, not the borrower. It offers no protection to the borrower.


A person’s debts or financial obligations, including Mortgages, credit card debts and personal loans.

Line of Credit

A flexible loan arrangement with a specified limit to be used at a borrower’s discretion.

Line of credit loan

A flexible loan arrangement with a specified limit to be used at a customer’s discretion. Also referred to by some lenders as an Equity loan or All in One loan.

Loan Agreement

The contract between the lender and the borrower which sets out the conditions that apply to the loan.

Loan to Value Ratio (LVR)

This is the measure of the amount of the loan compared to the value of the property. Commonly called LVR. E.g. for a loan of $270,000 on a home valued at $300,000, the LVR is $270,000 divided by $300,000 then multiplied by 100, and expressed as a percentage i.e. 90%.


An advance of funds from a lender to a borrower on the agreement that the borrower pays interest on the loan, plus pay back the initial amount of the loan at or over an agreed time.

Low documentation (Low Doc) loan

Loans available to applicants who may not have up to date or complete financial information available at the time of application.

Lump Sum Payment

An additional payment made by the borrower to reduce the loan amount. These payments are in addition to regular installments.

Lump sum repayments

Additional ad hoc repayments, made over and above the minimum loan repayment required.


Abbreviation for the term Loan to Value Ratio. It is the percentage of the loan amount compared to the value of that property. So if a house is worth $160,000, and the mortgage is $100,000, then the LVR is 62.50%. Most lenders require a borrower to take out Lender’s Mortgage Insurance if the LVR is 80% or more.




The date when a debt must be paid in full.

Maximum loan amount

The maximum amount that can be borrowed. It’s based on a borrower’s disposable income, deposit, and the purchase price of the property.

Minimum repayment required

The amount a borrower is contractually obliged to pay each month, in order to repay a loan within an agreed term.

Mortgage Broker

A person or organisation offering to organise or sell loans on behalf of a group of lenders.

Mortgage Guarantee Insurance

Insurance protecting the lender against loss in the event that the borrower defaults on the repayments or other covenants of the mortgage. The borrower will remain liable for their default.

Mortgage Manager

A company responsible for the day-to-day management of loan.

Mortgage Protection Insurance

This insurance covers loan repayments should a borrower become sick, injured or redundant and unable to work. It is also called income protection insurance. This insurance covers the borrower not the lender.

Mortgage offset account

A savings account linked to a home loan. The interest earned by the money in the savings account offsets – or reduces – the interest due on the home loan. A 100% offset is where the interest rates earned and paid are the same. A partial offset account is where the interest earned on the offset account is only a portion of the rate paid on the home loan.

Mortgage registration fee

A State Government charge for the registration of a loan. Because the property acts as security for a home loan, the government requires a home loan to be registered so that all claims on a property can be checked by any future buyers of that property.


The funds borrowed to purchase a property. The property acts as security for repayment of the loan. The lender holds the title or deed to the property. It’s also known as a home loan. The lender (mortgagee) has the right to take the property if the mortgagor fails to repay the loan.


The lender of home loan funds and holder of the mortgage.


A person who borrows money and grants a mortgage over their property as security for the loan.



Net Income

The income received by an individual after tax has been taken out.

Net Profit

The profit remaining in a business after all expenses have been taken out, but before tax.

Non-conforming loan

Specialist lenders provide these types of loans to borrowers who fall outside the normal eligibility requirements of mainstream lenders.

Notice of termination

Notice given either by a landlord or tenant that they want to end the rental agreement and vacate the property in compliance with the terms and conditions of the lease.



Offset account

A transactional account linked to the home loan. The balance held in this account offsets the balance in the home loan, helping to reduce the interest paid and overall term of the loan.


An arbitrator that provides an avenue through which customers can make complaints about their loan consultant or lender and have it dealt with independently.


The expenses incurred in generating income – typically rates, insurance, repairs and maintenance and management fees.

Owner Occupied

Property that is lived in by its owners.



Passed in

A property is ‘passed in’ at auction if the highest bid fails to meet the reserve price set by the seller.


Abbreviation for Pay-As-You-Earn, a taxation procedure for wage and salary earners under which income tax is deducted in installments from periodic pay.


Allows a different property to be substituted as security for an existing loan. Useful if you are buying a new home but don’t want to set up a new mortgage.

Principal and Interest (P&I)

A loan in which both principal and interest are paid with each repayment during the term of the loan.


The amount owing on a loan, on which interest must be paid.




“To recalculate the minimum repayment required to repay the outstanding balance of a loan over the remaining period. This generally happens when:
The loan term is extended or The loan amount has significantly increased or decreased compared to the original loan amount.”

Redraw facility

A loan facility whereby you can make additional repayments and then access those extra funds if necessary.


To switch mortgage providers and arrange a new loan for the same property. This can involve replacement or extending an existing loan with funds from the same lender or a different lender.

Regulated Loans

Loans which are considered for personal use and are governed by regulations of the Consumer Credit Code.

Rent review

A periodic review of rent under a lease using a predetermined method. It may be in line with the Consumer Price Index (CPI) or in accordance with a market valuation.

Reserve price

At an auction, this is the minimum price acceptable to the seller of a property.

Residential Tenancies Tribunal

Specialist body that exist in most Australian States and Territories to resolve disputes between landlords and residential tenants.

Residential Tenancy Database

Used by real estate agents to identify tenants with a history of breaching tenancy rules.




Research carried out, prior to the settlement of the property, to confirm information about the property. Searches are usually arranged by a solicitor.


To take guarantee over property for purposes of protecting a loan.


The property offered as security for a loan.


Ability of borrower to make and meet repayments on a loan based on the borrowers expenses and income(s).

Settlement date

Is the completion of the sale or purchase of a property. When the final payments are made at settlement, the lender will receive the signed transfer and the mortgage. The lender will hold the title deeds and the mortgage until the loan is repaid.


A person authorised to access an account.

Split loan

Generally a loan that is part variable and part fixed, but it can also be a loan with multiple variable parts. Borrowers wanting to use equity in a property to invest in the share market may make “multiple variable splits” to better track the return on their investment.

Stamp duty

A State Government tax based on the purchase price of the property. It’s also payable on mortgages in some states. Each state and territory has different rules and calculations. To estimate the amount of stamp duty you may have to pay, use our stamp duty calculator.

Standard Variable Rate

An interest rate, which is applied to a loan. These may have features such as redraw facility, construction, split loans options and mortgage offset.

Standard variable loan

A loan which has an interest rate that varies according to market forces. The loan usually has comprehensive features, such as offset and redraw facilities.

Strata title

The form of property ownership most commonly associated with units, apartments and townhouses, where the owner holds title to a particular unit, which is called a lot, in a strata plan. It acts as evidence of a unit’s ownership. In a strata plan, individuals each own a small portion of a strata building such as a unit – which is identified as ‘lot’ on the title. All owners in a strata plan share common property such as external walls, windows, roof, driveways, foyers, fences, lawns and gardens.


A plan that shows the boundaries and the building position on a block of land.



Tenants in common

A form of agreement often used when friends or family purchase a property together. It details the equal or unequal holding of property by two or more people. If one person dies, their share passes according to their Will or the law, rather than to the owner of the other share.


The duration of a loan, or a specific period within that loan. This is usually written in months for example, 360 months equals 30 years.

Title deed

Document disclosing the legal description and ownership of a property.

Title fees

Charged by a state or territory’s Titles Office for title searches, property ownership transfers, the registration of new mortgages and the discharge of old ones.

Title search

A request to the Lands Titles Office to ascertain the ownership of a specified property and any encumbrances, covenants and easements that may be recorded on the title.

Torrens title

Torrens title is the most common form of property title in Australia. The Real Property Act (RPA) is the legislation that governs the operation of Torrens title. Ownership of the property is registered with the Land Titles Office and evidenced by the Certificate of Title, which shows the current owner’s name and any other interests in the property e.g. mortgages.


A document registered with the Titles Office that confirms the change of ownership or a property.



A property free of encumbrances (mortgages) or restrictions.

Uniform Consumer Credit Code (UCCC)

“This is the legal framework that governs the relationship between borrowers and lenders. It requires all credit providers such as banks, building societies, credit unions, finance companies and businesses, to:
Explain the borrowers rights and obligations
Disclose all relevant information about a loan in a written contract – including interest rates, fees, and commissions.”




A report required by the lender, detailing a professional opinion of property value.

Variable Interest Rate

This is a fluctuating rate of interest charged by lenders. Variable interest rates change as official market interest rates rise and fall in accordance with market forces.


A change to any part of a loan contract.


The seller of a property.




The percentage return of a property calculated by dividing the net income by the opening market value or price.




Statutory descriptions of the allowable uses of land as set out by local councils or planning authorities.