Glossary
This glossary should help first home buyers better understand the key terms and concepts they’ll encounter when navigating the home buying and loan application process.
A preliminary approval from a lender for a home loan, based on a review of your financial situation. It gives you an idea of how much you can borrow and strengthens your position when making offers on properties.
The maximum amount a lender is willing to loan you based on your income, expenses, credit history and existing debts.
Fees charged by lenders when you break or exit a fixed-rate loan before the end of the fixed period. Break costs can be substantial and are calculated based on factors such as the time remaining in the fixed period and changes in interest rates.
A professional inspection conducted to check for structural issues, defects and pest infestations in a property before finalising the purchase. It helps ensure the property is in good condition and saves you from unexpected repair costs.
A licensed professional who represents the buyer in the property purchase process, helping you find, evaluate and negotiate the purchase of a property.
A licensed professional who handles the legal aspects of property transactions, such as title transfers, contracts and settlement. They ensure that all legal requirements are met during the home buying process.
A numerical representation of your creditworthiness, based on your credit history. Lenders use your credit score to determine your eligibility for a loan and the interest rate you’ll be offered.
A financial measure used by lenders to assess the percentage of your income that goes towards paying off debt. A lower DTI indicates a better capacity to manage mortgage repayments.
The upfront amount you pay towards the purchase of a property, typically ranging from 10% to 20% of the property’s value. A larger deposit can help you avoid Lenders Mortgage Insurance (LMI) and improve your chances of loan approval.
The difference between the current value of your property and the outstanding balance on your mortgage. As you repay your loan and your property increases in value, your equity grows.
A plan to remove a family guarantee from a home loan by refinancing the loan once you’ve built up sufficient equity in your property, typically when the loan-to-value ratio (LVR) drops below 80%.
A form of support where a family member (usually a parent) uses their property as security to help you secure a home loan. It allows you to borrow more or avoid Lenders Mortgage Insurance (LMI) with a smaller deposit.
A home loan with an interest rate that remains unchanged for a set period, typically one to five years. It provides stability and predictability in your mortgage repayments but may come with break costs if you exit the loan early.
A government grant available to eligible first home buyers to assist with the purchase or construction of a new home. The amount of the grant varies by state or territory and eligibility requirements differ.
A government scheme that allows first home buyers to save for a home deposit through voluntary contributions to their superannuation fund, benefiting from the tax advantages of super contributions.
A loan provided by a bank or financial institution to help you purchase a property. It is typically repaid over 25 to 30 years through regular mortgage repayments.
A type of home loan where, for a set period, you only pay the interest on the loan, not the principal. This results in lower repayments during the interest-only period but does not reduce the loan balance.
A type of insurance required by lenders when your deposit is less than 20% of the property’s value. It protects the lender if you default on your loan, but the cost is passed on to you as the borrower.
A feature that allows you to transfer your existing home loan to a new property without refinancing. This can be useful if you move house but want to keep your current loan terms.
The ratio of your loan amount to the value of the property, expressed as a percentage. A lower LVR (below 80%) is seen as less risky by lenders and can help you avoid Lenders Mortgage Insurance (LMI).
A legal agreement where a bank or financial institution lends you money to buy a property and you agree to repay the loan over time, usually with interest. The lender holds a lien on the property as security.
A transaction account linked to your home loan. The balance in the offset account reduces the amount of interest you pay on your loan. For example, if you have a $400,000 loan and $20,000 in your offset account, you’ll only be charged interest on $380,000.
A preliminary approval from a lender that gives you a clear understanding of how much you can borrow. It’s not a guarantee of final approval but helps strengthen your negotiating position when making offers on properties.
The original loan amount or the outstanding balance of your home loan, excluding interest. When you make repayments, a portion goes towards paying down the principal, while the rest covers the interest.
A feature that allows you to withdraw extra repayments you’ve made on your loan, giving you access to funds if needed for unexpected expenses or financial emergencies.
The process of replacing your existing home loan with a new one, often to secure a lower interest rate, better loan terms, or remove a family guarantee. Refinancing can help reduce your repayments and save on interest over time.
Regular payments made towards your home loan, typically on a monthly, fortnightly or weekly basis. Repayments include both principal and interest.
A loan where a portion is fixed at a stable interest rate, and the remainder has a variable interest rate. This allows you to benefit from both the stability of fixed rates and the flexibility of variable rates.
A government tax on property purchases. The amount of stamp duty payable depends on the property’s value and the state or territory in which you’re buying. Some first home buyers may be eligible for stamp duty concessions or exemptions.
A home loan with an interest rate that can fluctuate over time, based on changes in the market and the Reserve Bank of Australia’s (RBA) cash rate. Your repayments can increase or decrease throughout the loan term.
Your Guide to Affordable Homeownership
1
Meet Your Coach
Let us pair you with a dedicated home loan coach. They’ll provide guidance to help you through the home buying process.
2
Create a Savings Plan
Your coach will estimate your borrowing power and provide budgeting advice, made easy with our My First Track app, so you can save confidently for your new home.
3
Get Your Loan
When you're ready, apply for and secure the loan you need to purchase your first home.
