Every mortgage term you will encounter when buying property or managing a home loan in Australia, explained in plain English. Use the A–Z index to jump to the term you need.
How to use this glossary: Click any letter below to jump to terms starting with that letter. Each definition cross-links to related terms and relevant calculators. Definitions reflect Australian law and market conventions as at 2026.
The gradual repayment of a loan through scheduled principal and interest payments over a set term. With a standard 30-year amortising mortgage, each monthly repayment covers the interest due plus a portion of the principal. In the early years the split heavily favours interest; in the final years almost all of each payment reduces the principal. An amortisation schedule shows the exact breakdown of every payment across the loan term. Australian home loans are almost exclusively fully amortising products — meaning the balance reaches zero at the end of the agreed term, provided all repayments are made on time. See also: Principal, P&I.
The federal regulator that supervises banks, credit unions, building societies, insurance companies, and superannuation funds. APRA sets the prudential rules that govern home lending, including the serviceability buffer (currently 3% above the actual loan rate) that all lenders must apply when assessing borrowers. APRA introduced tighter lending standards in 2014 and 2017 to cool investor lending, and again in 2021 to manage household debt risks. When you see references to the "3% serviceability buffer" or restrictions on interest-only lending, these originate from APRA guidelines. See also: Serviceability, HEM.
The corporate and consumer financial services regulator. ASIC oversees mortgage brokers, financial advisers, and lenders under the National Consumer Credit Protection Act 2009 (NCCP Act). ASIC's Regulatory Guide 209 sets out responsible lending obligations. If you have a complaint about a lender or broker, ASIC is not a dispute resolution service — you should contact AFCA (Australian Financial Complaints Authority) first, and ASIC for systemic misconduct.
The interest rate a lender uses when testing whether a borrower can afford a loan — not the actual rate they will pay. Under APRA guidelines, lenders must assess borrowers at the higher of the actual loan rate plus 3% or a minimum floor rate (commonly 5.5–6.0%). This buffer exists so borrowers can still afford repayments if rates rise after settlement. With current variable rates around 6.0–7.0%, typical assessment rates are approximately 9.0–10.0%. See also: Serviceability, APRA.
The fee charged by a lender when you exit a fixed-rate home loan before the end of the fixed term. Also known as an early repayment adjustment (ERA) or economic cost. Break costs are calculated using a formula based on the difference between your contracted fixed rate and current wholesale market rates — if wholesale rates have fallen since you fixed, break costs can be substantial (sometimes tens of thousands of dollars). If wholesale rates have risen, break costs may be zero or minimal. Always get a written break cost quote from your lender before deciding to refinance a fixed loan. See also: Fixed Rate, Refinancing.
A short-term loan (typically 6–12 months) used to bridge the gap between buying a new property and selling an existing one. You hold both loans simultaneously during the bridging period; once the old property sells, the proceeds pay off the bridging component. Bridging loans carry higher interest rates than standard home loans because of the increased risk and short term. They are also available as "open" (no firm sale date) or "closed" (sale date confirmed). Most lenders calculate the peak debt (both properties combined) when assessing serviceability. See also: LVR, Settlement.
A professional inspection of a property before purchase to identify structural defects, pest infestations (especially termites), water damage, and major maintenance issues. Highly recommended for all property purchases; typically costs $400–$700. Issues found in an inspection can be used to renegotiate the purchase price or request vendor repairs. In most states, a building inspection is a standard contract condition for private treaty sales (not auctions). Skipping this to save $500 is false economy — a missed termite infestation can cost $50,000–$200,000 to remediate. See also: Conveyancing.
The profit made when selling an asset (including property) for more than its purchase price. In Australia, capital gains on an investment property are included in assessable income in the year of sale. A 50% CGT discount applies if the property has been held for more than 12 months. Your principal place of residence (PPOR) is generally exempt from CGT. Capital gains affect mortgage planning because expected capital growth is a key input in rent-vs-buy analysis and investment property cashflow modelling. See also: Negative Gearing.
The interest rate on overnight loans in the interbank market, set by the Reserve Bank of Australia's board at monthly meetings (excluding January). The cash rate is the primary monetary policy tool — the RBA raises it to slow inflation and lowers it to stimulate the economy. Lenders use the cash rate as a reference point for variable mortgage rates. The current cash rate is 4.1% (as of 2026-04-16). The next RBA meeting is 5 May 2026. Historically, the cash rate has ranged from a record low of 0.10% (2020–2022) to highs above 17% in the early 1990s. See also: Historical Rates.
A standardised rate that combines the interest rate plus most fees and charges into a single percentage, designed to make home loan comparison easier. Required by law in Australian advertising under the National Credit Code. Calculated on a standard $150,000 loan over 25 years. The comparison rate is useful for revealing hidden fees but has limitations: it does not include offset account savings, it uses a fixed loan amount and term, and fees that vary by loan amount may not be fully captured. Two loans with the same comparison rate may have very different true costs for your specific borrowing amount. See also: Variable Rate, Fixed Rate.
The legal process of transferring property ownership from seller to buyer. A licensed conveyancer or solicitor conducts searches (title, council, land tax), prepares the contract of sale, manages the exchange of contracts and deposit, and coordinates settlement. In Australia, conveyancing fees typically range from $800 to $2,500 for a standard residential purchase, depending on complexity and state. Some online conveyancing services charge as little as $500–$800, but these offer less personalised support. Budget for $1,500–$2,000 as part of your total purchase costs. See also: Settlement, Stamp Duty.
A statutory right to withdraw from a property contract within a short period after exchange. In most Australian states, buyers of residential property (purchased privately, not at auction) have a 5-business-day cooling-off period. Withdrawing during cooling-off typically forfeits 0.25% of the purchase price. There is no cooling-off period for auction purchases — which is why pre-approval is essential before bidding at auction. The cooling-off period varies by state: QLD has 5 business days, NSW 5 business days, VIC 3 business days. See also: Pre-Approval.
When two or more properties are used as security for one or more loans with the same lender. For example, using equity in your existing home as additional security for an investment property purchase. While cross-collateralisation can help you access finance, it reduces flexibility: the lender has a claim over both properties, making it harder to sell or refinance either one independently. Most property investors and brokers recommend avoiding cross-collateralisation where possible, and instead using a standalone loan for each property secured by that property only. See also: Equity, LVR.
Failure to meet the obligations of a loan agreement — most commonly missing a required repayment. In Australia, a lender must send a default notice before taking legal action. Under the National Credit Code, borrowers have 30 days to remedy a default after receiving notice. If the default is not remedied, the lender can issue a statement of claim and ultimately repossess and sell the property to recover the debt. Defaults appear on your credit file and remain for five years, significantly affecting future borrowing capacity. If you are struggling with repayments, contact your lender to discuss a hardship variation before defaulting. See also: Hardship Variation, Mortgage Stress.
The upfront cash contribution you make toward a property purchase, typically paid at exchange of contracts (usually 10% of purchase price, though some vendors accept 5%). The deposit is held in trust until settlement. Note that the deposit paid at exchange is not the same as your home loan deposit — the exchange deposit proves commitment to the purchase, while your loan deposit is the total equity you bring to the transaction. If the deposit is less than 20% of the property value, most lenders require Lenders Mortgage Insurance (LMI), unless the loan is covered by a government guarantee scheme. See also: LMI, LVR, Deposit Calculator.
The formal process of removing a lender's registered interest from a property title after the home loan is fully repaid. Once you pay off your mortgage, your lender must lodge a discharge with the relevant state titles office. Discharge fees typically range from $150 to $350 and take 2–4 weeks. If you are refinancing, the discharge of the old mortgage and registration of the new one happen simultaneously at settlement. Always factor discharge fees into your refinancing break-even calculation. See also: Refinancing, Settlement.
The process of accessing loan funds — either the initial release of funds at settlement or progressive drawdowns during a construction loan. In a standard home purchase, drawdown occurs at settlement when the lender transfers the loan funds to complete the purchase. In a construction loan, funds are drawn down in stages as construction progresses (typically slab, frame, lock-up, fixing, and completion). Interest is charged only on the drawn amount, so repayments during construction are lower than after final drawdown. See also: Settlement.
The difference between your property's current market value and the outstanding loan balance. For example, a property worth $800,000 with a $500,000 mortgage has $300,000 in equity. Equity builds over time through capital growth and principal repayments. You can access equity by refinancing and drawing out funds (equity release) or by using a home equity line of credit. Lenders typically allow you to access equity up to 80% of the property value (to avoid LMI). Equity is also referred to as "usable equity" — for a $800,000 property, lenders would typically allow access to $640,000 minus the current loan balance. See also: LVR, Refinancing.
A fee charged when you discharge a home loan within a set period (typically 1–5 years). Exit fees (also called deferred establishment fees or DEFs) were banned for new home loans taken out after 1 July 2011 under the National Consumer Credit Protection Amendment Act. However, older loans originated before this date may still carry exit fees. If you have a pre-2011 loan, check your loan contract before refinancing — exit fees can be substantial and may affect the economics of switching lenders. See also: Refinancing, Break Costs.
A federal and state-funded cash grant for eligible first home buyers purchasing a new or substantially renovated home. The Federal Government provides $10,000 and some states top this up further (Queensland and Tasmania offer $30,000 as of 2026). FHOG is not available for established homes in most states. Key eligibility conditions: Australian citizen or permanent resident; never previously owned residential property in Australia; intend to live in the property as your principal place of residence for at least 12 months. Apply through your lender or state revenue office. See also: FHB Guides by State.
A federal government scheme allowing first home buyers to make voluntary contributions to their super fund and later withdraw them for a home deposit. You can contribute up to $15,000 per financial year and withdraw up to $50,000 total (plus associated earnings). Contributions are taxed at 15% (rather than your marginal rate), creating a tax saving that effectively boosts your deposit by 15–30% compared to saving from after-tax income. Applications are made through the ATO myGov portal. See also: FHOG.
An interest rate that is locked in for a set period (typically 1–5 years) regardless of movements in the RBA cash rate or market rates. Fixed rates provide payment certainty — you know exactly what your repayment will be each month during the fixed period. The trade-off is that you cannot make large extra repayments without incurring break costs, and you miss out if variable rates fall below your fixed rate. Australian fixed rates currently range from approximately 5.4–5.8% for 1–3 year terms. After the fixed term expires, the loan reverts to a variable rate (the revert rate), which is often higher than the standard variable rate — so it pays to refinance or renegotiate at the end of the fixed period. See also: Variable Rate, Split Loan, Break Costs.
A person (usually a parent) who agrees to be legally responsible for a loan if the borrower cannot repay it. In a "family guarantee" structure, the guarantor's property is used as additional security, allowing the borrower to purchase with a small deposit (sometimes 0%) without paying LMI. The guarantee can be limited (for a portion of the loan) or unlimited. Being a guarantor is a serious commitment — if the borrower defaults, the lender can pursue the guarantor for the full outstanding amount, including selling the guarantor's property. Guarantors should always get independent legal and financial advice before agreeing. See also: LMI, Default.
A formal arrangement with your lender to temporarily change your loan terms during a period of financial difficulty. Under the National Credit Code, borrowers experiencing genuine hardship (due to illness, job loss, relationship breakdown, or natural disaster) can request a hardship variation. Options include temporary repayment reduction, interest-only period, repayment pause, or loan term extension. Lenders must consider hardship applications and respond within 21 days. A hardship variation is not the same as default — it is a proactive solution that avoids negative credit reporting. Contact the National Debt Helpline (1800 007 007) if you need help navigating the process. See also: Default, Hardship Guide.
An income-contingent student loan administered by the Australian government, repaid through the tax system once income exceeds the repayment threshold (approximately $54,000 in 2026). HECS-HELP debt affects home loan applications in two ways: the compulsory repayment amount reduces your net income (reducing borrowing capacity), and some lenders treat the outstanding balance as a liability. A $50,000 HECS debt might reduce borrowing capacity by $50,000–$100,000 depending on the lender's assessment model. Voluntary HECS repayments before applying can meaningfully improve your borrowing power. See also: Serviceability.
A benchmark developed by the Melbourne Institute that estimates minimum household living expenses based on household size, income bracket, and location. Australian lenders use HEM as a floor when assessing borrowing capacity — if you declare lower expenses than HEM, the lender will use HEM instead. HEM is not publicly available in full, but estimates suggest approximately $1,600–$2,200 per month for a single person (2026 figures). The Royal Commission into Banking (2019) found that over-reliance on HEM without verifying actual expenses contributed to irresponsible lending. Lenders now apply more scrutiny, especially for borrowers with above-average spending. See also: Serviceability, APRA.
A loan structure where the borrower pays only the interest charges for a set period (typically 1–5 years), with no principal reduction. After the IO period, the loan converts to principal and interest (P&I) over the remaining term. IO loans have lower repayments during the IO phase but result in higher total interest costs and higher P&I repayments afterward. APRA restricts IO lending to manage risk. IO is most common for investment properties where the interest is tax-deductible. Owner-occupiers are generally better served by P&I loans. See also: P&I, IO vs P&I Calculator.
The list of law firms and conveyancers that a specific lender will accept to act on their behalf at settlement. If your conveyancer is not on the lender's panel, you may need a second firm to represent the lender, which increases costs and complexity. Most large conveyancers are on multiple lender panels. Worth confirming when choosing your conveyancer after your loan is approved. See also: Conveyancing.
An insurance policy that protects the lender (not the borrower) if the borrower defaults and the property sale does not cover the outstanding loan. LMI is required when the LVR exceeds 80%. Despite protecting the lender, the cost is paid by the borrower — typically added to the loan amount. Costs vary by LVR: approximately 0.7% of the loan at 81–85% LVR, rising to 3.5–5% at 90–95% LVR. Australia's two main LMI providers are Helia (formerly Genworth) and QBE. LMI is not refundable if you refinance early. Some professional groups (doctors, lawyers, accountants) can access LMI waivers at up to 90% LVR with certain lenders. See also: LVR, LMI Calculator.
Certain lender programs or borrower profiles that allow borrowing above 80% LVR without paying Lenders Mortgage Insurance. Common waiver categories include: medical professionals (doctors, surgeons, dentists) — some lenders waive LMI to 90% LVR; legal professionals (solicitors, barristers) at some lenders; First Home Guarantee participants (government-backed guarantee replaces LMI for FHBs with 5% deposit); and family guarantee structures where a guarantor's equity eliminates LMI. Waivers vary by lender and are subject to policy changes. See also: LMI, Guarantor.
The percentage of a property's value that is borrowed. Calculated as: loan amount ÷ property value × 100. An $80,000 loan on a $100,000 property is an 80% LVR. LVR determines whether LMI applies (above 80%), what interest rate you receive (lower LVR = better rate), and how much usable equity you have. Most lenders have tiered pricing where LVR below 60% attracts the best rates, 60–80% standard rates, and above 80% higher rates plus LMI. Lenders use the lower of purchase price and bank valuation to calculate LVR. See also: LMI, Equity, Deposit Calculator.
A licensed intermediary who sources home loans from multiple lenders on your behalf. Brokers are paid a commission by lenders (upfront commission: typically 0.6–0.7% of loan amount; trail commission: 0.15–0.2% per year of loan balance outstanding). Under the Best Interests Duty introduced in 2021, brokers are legally required to act in the best interests of the borrower. Using a broker gives you access to a panel of lenders including those without retail branches, and brokers handle the application process. For complex situations (self-employed, unusual income, bad credit history), a specialist broker is often invaluable. See also: Comparison Rate.
Broadly defined as spending more than 30% of pre-tax household income on home loan repayments. Roy Morgan's definition also includes borrowers who are struggling to meet repayments regardless of the ratio. As of 2026, approximately 26.6% of Australian mortgage holders (1.319 million) are in mortgage stress. The 30% threshold is a guideline, not a rule — a high-income household spending 35% on their mortgage may have no difficulty, while a low-income household at 28% may be struggling. Key drivers of stress include rate rises, reduced hours or job loss, relationship breakdown, and unexpected expenses. See also: Stress Calculator, Mortgage Stress Guide.
When the outstanding loan balance exceeds the current market value of the property. Also called "being underwater" on a mortgage. This can occur during property price falls. Negative equity is not immediately dangerous if you can continue making repayments — you only crystallise the loss if you sell. It becomes a serious problem if you need to sell (job relocation, relationship breakdown) or if the lender requires repayment of the excess. Negative equity is also the reason interest-only loans are risky — if prices fall during the IO period, you have built no equity buffer through repayments. See also: Equity, Interest-Only.
When the costs of owning an investment property (interest, rates, insurance, maintenance, depreciation) exceed the rental income, creating a net loss. This loss can be offset against other income (salary, business income) to reduce taxable income. Negative gearing is a widely used strategy in Australia due to the tax benefit, especially for high-income earners in the 37–45% marginal tax brackets. Critics argue it inflates property prices by subsidising speculative investment. The tax benefit is more valuable the higher your marginal rate, and disappears in retirement when income (and marginal rate) falls. See also: Capital Gains.
A transaction account linked to your home loan where the balance reduces the principal on which interest is calculated. With a $600,000 mortgage and $50,000 in offset, you pay interest on $550,000. Your repayment amount stays the same, but more goes to principal — shortening the loan term. A full offset (100%) account reduces the balance dollar-for-dollar. Partial offset products reduce only a percentage of the balance. Offset accounts are more flexible than redraw because the funds are always accessible without restriction. See also: Redraw, Offset Calculator.
The standard loan repayment structure where each payment covers both the interest charged and a portion of the principal (the loan balance). P&I repayments gradually reduce the loan balance to zero over the loan term. In the early years, most of each repayment is interest; in the later years, most reduces the principal. P&I is the default for owner-occupier loans and is preferred over interest-only for borrowers who want to build equity and pay off their mortgage. P&I rates are typically 0.1–0.5% lower than IO rates from the same lender. See also: Interest-Only, Amortisation.
An offset account that reduces the loan balance by only a percentage of its balance rather than 100%. For example, a 40% partial offset account with a $50,000 balance only offsets $20,000 from the loan principal for interest calculation purposes. Partial offset products are far less beneficial than full offset accounts and are becoming rare among competitive lenders. When comparing loans, always check whether the offset is full (100%) or partial. See also: Offset Account.
A loan feature that allows you to transfer your existing mortgage to a new property without full refinancing. If you sell your home and buy another, portability lets you keep the same loan terms, rate, and features — avoiding break costs on a fixed rate and saving on refinancing fees. Not all lenders offer portability, and conditions apply (the new property must meet lending criteria, and the process must complete within a set timeframe). Useful for borrowers on fixed rates who are selling and buying simultaneously. See also: Fixed Rate, Bridging Loan.
A lender's conditional commitment to provide a loan up to a specified amount, subject to satisfactory valuation of the specific property and no material change in your circumstances. Pre-approval is not a guarantee of final approval — it can be withdrawn if your income changes, you take on new debt, or the property valuation comes in below the purchase price. Pre-approval is typically valid for 3–6 months. It is useful for auction bidders and to narrow your property search to an affordable range. Getting pre-approval involves a full credit check and leaves a hard enquiry on your credit file. See also: Unconditional Approval.
The outstanding loan balance — the amount you owe the lender, excluding interest charges. When you first take out a $600,000 loan, the principal is $600,000. Each P&I repayment reduces the principal by a small amount. The interest for each period is calculated on the outstanding principal balance. Reducing your principal faster (through extra repayments or an offset account) reduces interest costs and shortens the loan term. See also: Amortisation, Offset Account.
A feature that allows you to access extra repayments you have made above the minimum required amount. If you have been paying $500/month extra on your mortgage, you may be able to redraw that accumulated amount if needed. Unlike an offset account, extra repayments are applied directly to the loan balance, and redraw access may be subject to lender conditions (minimum amounts, fees, approval required). For investment properties, redrawing funds and using them for personal purposes can create tax complications by mixing deductible and non-deductible debt. See also: Offset Account.
The process of replacing your existing home loan with a new one — either with the same lender (also called a rate review or retention) or with a different lender. The main reasons to refinance are: securing a lower interest rate, accessing equity, switching loan types (variable to fixed, IO to P&I), or consolidating debt. Refinancing involves costs — discharge fee, application fee, valuation fee, legal/title costs — typically $800 to $1,500 total. Use the break-even analysis to ensure rate savings outweigh these costs within a reasonable timeframe (usually 12–24 months). See also: Refinancing Calculator, Break Costs.
A lender's assessment of whether a borrower can comfortably repay a loan under stressed conditions. The serviceability test takes your total income, subtracts living expenses (using actual declared expenses or the HEM benchmark, whichever is higher), subtracts existing debt commitments, and checks whether the remaining amount can service the proposed loan repayments at the assessment rate (actual rate + 3% buffer). Serviceability is the primary constraint on how much you can borrow in Australia. See also: HEM, APRA, Borrowing Capacity Calculator.
The final stage of a property transaction when the buyer pays the balance of the purchase price and ownership officially transfers. In Australia, settlement typically occurs 30–90 days after the contract is signed (the timeframe is negotiated between buyer and seller). At settlement, your lender releases the loan funds, stamp duty is paid, and the title transfers to your name. e-Conveyancing platforms (PEXA, Sympli) have replaced most paper-based settlements. After settlement, you pick up the keys. See also: Conveyancing, Stamp Duty.
A home loan where part of the balance is on a fixed rate and part is on a variable rate. For example, $400,000 fixed at 5.6% for 3 years and $200,000 variable at 6.4%. A split provides rate certainty on the fixed portion while retaining flexibility (offset, extra repayments) on the variable portion. The split ratio is your choice — it depends on your risk tolerance, cash flow needs, and view of where rates are headed. See also: Split Loan Calculator, Fixed Rate, Variable Rate.
A state government tax payable on the purchase of property. Calculated as a percentage of the purchase price using tiered rate brackets — the rate increases with the property value. Each state and territory has its own rates, schedules, and concessions. First home buyers typically receive significant concessions or full exemptions below certain price thresholds. Stamp duty is paid at settlement and cannot typically be rolled into the mortgage. On a $750,000 property, stamp duty ranges from approximately $20,000 (WA) to $40,000 (NSW) depending on the state. See also: Stamp Duty Calculator.
A form of property ownership for apartments, units, and townhouses where you own your individual lot plus a share of common property (lobbies, gardens, pools, lifts). Strata ownership involves mandatory body corporate (owners corporation) fees that cover maintenance of common areas, building insurance, and a sinking fund for future capital works. Strata levies range from $500/quarter for a small block to $5,000+/quarter for a high-rise with amenities. Before purchasing strata, review the strata report for outstanding levies, pending disputes, and the health of the sinking fund. See also: Conveyancing.
An insurance policy that protects property buyers and lenders against financial loss from defects in the property title. Covers issues that may not be discoverable through standard pre-purchase searches, such as fraud, errors in title registration, encroachments, and illegal building works. A one-off premium at settlement (typically $300–$600 for residential property). Most lenders require title insurance as a condition of the loan. See also: Conveyancing, Settlement.
The official term used in some states for what is commonly called stamp duty. Queensland, Western Australia, the ACT, and the NT use "transfer duty" in their legislation. NSW and Victoria use "transfer duty" and "duty" interchangeably with "stamp duty." The tax is functionally identical regardless of the name used. See also: Stamp Duty.
A lender's confirmed, binding commitment to provide the loan after all conditions have been satisfied — including satisfactory property valuation, verification of income and employment, and completion of credit checks. Unconditional approval (also called formal or full approval) is what you need before exchange of contracts in a private treaty sale. It differs from pre-approval, which is conditional and not a guarantee of funding. See also: Pre-Approval.
An independent assessment of a property's market value conducted by a registered valuer on behalf of the lender. The bank uses the valuation (not the purchase price) to calculate LVR and determine whether to approve the loan. If the valuation comes in below the purchase price (a "short val"), the lender will only lend against the valuation figure — meaning you may need a larger deposit to proceed. Valuation fees ($200–$600) are typically charged to the borrower. Some lenders use automated valuation models (AVMs) for standard properties at lower LVRs; others require a full physical inspection. See also: LVR.
An interest rate that can change over time in response to RBA cash rate decisions, lender funding costs, and competitive pressure. Variable rates are the default in Australia — the majority of mortgages are on variable rates. When the RBA raises the cash rate, variable mortgage rates typically rise within days; when it cuts, lenders often pass on the reduction more slowly. Current typical variable rates range from 6.0–7.0% p.a. (2026). Variable loans offer features like offset accounts, unlimited extra repayments, and flexible redraws that fixed loans restrict. The trade-off is payment uncertainty. See also: Fixed Rate, Split Loan.
Use our free calculators to see how these concepts affect your own mortgage.
Repayment Calculator →Disclaimer: This glossary is general information only and does not constitute financial advice. Mortgage products, legislation, and market conditions change regularly. Always verify details with your lender, broker, or a qualified financial adviser before making decisions.