Basic Mortgage Glossary
Building insurance
Policy that covers damage caused by natural event or theft.
Cash-out refinance
Equity of your property used to borrow money for personal and investment use. Cash-out can be used to pay off credit card debt, renovation, purchase an investment property or getting some new furniture ect.
First home owner grant (FHOG)
A grant that given by the federal state government. Please refer to http://www.firsthome.gov.au/
Fixed rate
Mortgage with a fixed interest rate over certain term of the loan.
Interest only
You will be paying the interest only during the interest only period. Once your interest only period ends, repayment will switch to principle and interest.
Loan term
The length of your loan. Usually 15,20 or 30 years.
Loan to value ratio (LVR)
Loan to value ratio is a ratio between the loan amount and purchase or valuation price. LVR is an indicator used by the lender to assess the risk of this loan. The higher the LVR the higher the risk for the lender. Over 80% of LVR could require a mortgage insurance.
Mortgage insurance
Mortgage insurance is an insurance paid by the borrower when LVR is more than 80%.(subject to circumstances) This insurance is to protect the lender against financial risk.
Offset
A transaction account that linked to your home loan or investment loan account. Money that deposited in this account could offset the loan amount that you owe. Interest will only be charged on the differences.
Principle & interest
Principle & interest is the most common type of repayment. Repayment is divided into two portions. Principle is the money you loan from the lender while interest is the interest charged on the amount you owe. You will be paying both at the same time.
Redraw
Redraw facility allows you to withdraw the additional payment that was made.
Stamp duty
A tax that purchaser must pay to the federal state government when purchase a property
Security
An asset used to protect the lender in an event of repayment is not made by the borrower per loan agreement. In such event, the lender has the right to sell the asset and pay the remaining balance.
Settlement
Settlement is a process where selling or purchasing a property comes to an end.
Variable rate
Mortgage with rate that fluctuate over the life of the loan. Monthly repayment varies from month to month*
Valuation
Property inspection required by the lender to estimate the market value of the property. Usually done by lender’s listed panel licensed valuer.
*subject to different lender
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