Key terms to understand your Home loan

LVR (Loan to Value Ratio): Percentage of your Home’s value that you are borrowing. A lower LVR = less risk for the bank.

LMI (Lenders Mortgage Insurance): Insurance that protects the bank when your deposit is under 20%. With programs like Help to Buy or First Home Guarantee, you don’t pay LMI.

Borrowing Capacity: The maximum amount a bank considers you can borrow. It’s the foundation for knowing how much you can afford. Calculated based on: your income, expenses, debts, dependants, rate buffers, and each lender’s internal policies.

Serviceability: Your real ability to repay the loan according to the bank’s criteria. Includes income, expenses, debts, lifestyle, and interest‑rate stress tests. It’s the heart of the credit assessment.

Fixed Rate: A fixed interest rate for a period (1–5 years). Stable and predictable repayments.

Variable Rate: A rate that can go up or down depending on the market. More flexibility to make changes or extra repayments.

Split Loan: Combines stability + flexibility. Your loan is divided into two parts: one fixed, one variable.

Offset Account: A bank account linked to your loan. The money you keep there reduces the interest you pay.

Redraw Facility: Allows you to withdraw extra repayments you’ve made. Works like a “buffer” inside your home loan.

Repayment: Your periodic payment (weekly, fortnightly, or monthly). It can be Interest Only, or Principal + Interest

Pre‑Approval: An initial estimate from the bank of how much you could borrow. Helps you search for your Home with more clarity.

Conditional Approval: The bank approves your loan subject to meeting certain conditions. A key step before final approval.

Unconditional Approval: The bank’s final approval. The green light to move toward settlement.

Settlement: The day the Home is transferred to your name and the bank releases the funds. It’s when you officially receive your Home.

Equity: The portion of your Home that is truly yours. It grows as you repay your loan or as the property value increases.

Stamp Duty: State tax when buying a Home. In NSW, first home buyers are exempt up to $1,000,000.

Conveyancer / Solicitor: The professional who manages the legal side of the purchase. Reviews contracts, coordinates settlement, and protects your interests.

Valuation: A report on the property’s value prepared by an independent valuer. The bank uses it to confirm the price is reasonable.

Principal & Interest: You pay interest + part of the principal. Your debt decreases over time.

Interest Only: You pay only interest for a period. Lower repayments, but the principal doesn’t decrease.

SMSF (Self‑Managed Super Fund): A superannuation fund you manage yourself that, under ATO rules, can be used to buy an investment property. Helps build property wealth inside your super.

Bridging Loan: A temporary loan to buy a new Home before selling your current one. Useful during transitions.

Refinance: Switching your loan to another bank or product to improve conditions. Can reduce your rate, repayment, or increase flexibility.

Equity Release / Cash Out: Using part of your Home’s equity to access funds. Used for renovations, investments, or debt consolidation.