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Understanding the home loan process let alone understanding the many financial terms associated with it can be overwhelming. Let us try and help by easily explaining some of the key terms you may come across.

Captain gains

Relates to investment properties when an increase in the value of a capital asset gives it a higher worth than the purchase price.

Basic variable home loans

This type of loan is the ‘no frills’ option with less features than other loan packages. As it brings cheaper rates, this often is suitable for first home buyers who want to save more money.


Something guaranteed as security for repayment of a loan in the event of a default.

Construction home loans

An approved amount of money that is loaned where the proceeds are used to finance construction to your land or property.


The monetary value of a property less the outstanding loan amount owing on the property.

Fixed interest rates

A loan where the interest rate does not change for a specified period. Fixed rate options are available across a wide range of products.

Interest only loans

Where for a set term, you pay only the interest on the principal balance, with the principal balance unchanged over that period.

Interest rate

A percentage calculated against an amount of money that you borrow and is paid as a fee for the use of that amount of money over time.

Lenders mortgage insurance

A percentage against the amount you borrow where no or little deposit is paid by you (up to 20% of the property value). This amount is paid by you in order to pay for the lender’s insurance to protect them in case you falter on your repayments.

Loan-to-value Ratio (LVR)

LVR as a percentage refers to the amount of the loan against the value of the property purchased.

Offset account

A savings account that is linked to a home loan. It reduces your interest payable because the interest is only charged on the net balance of your mortgage account minus your saving account.

Parental guarantee

Refers to when your parents or other family members help you secure a loan in your name by offering you to use the equity in their home for some or all of your loan.

Positive gearing

An increased income from the return of an investment property after maintenance and mortgage interest costs.


A pending loan whereby the loan documents have been approved by credit assessment and a loan is available when the borrower is ready to use it or purchase an asset.


Is the actual sum that you have borrowed, that is, the body of the loan. In contrast, the additional part you need to pay when you borrow money is the interest, which acts as a fee that is calculated as a percentage, usually against the original sum of the loan until the end of the term.

Principal & Interest

This is a loan where both principal and interest are paid together for an agreed amount of time.

Redraw facility

Where you can access additional payments made previously on a property purchased.

Limited guarantor loan

When another person or family member puts up a property they own that they have equity in as security, allowing you to borrow up to 100% of the purchase price of a home without needing a deposit. This will also mean that you will avoid paying the LMI.

Line of credit

Drawn from the equity in your property or an agreed amount that your lender has approved. This means you can use just a portion of what you borrowed and so you only pay interest on money actually withdrawn or used.

Low deposit loan

When you don’t have up to 20% of the value of a property as an initial deposit to secure the purchase of that asset, then a higher interest rate is usually charged.

Lo doc loan

For self employed clients supporting documents relating to income can be limited to a declaration from yourself and your accountant.

Typically lenders are restrictive on the maximum loan-to-value ratio allowable for these applications and they are suitable for clients with irregular income.

Loan settlement

Refers to when your debt or loan has been paid in full.

Negative gearing

Is a tax advantage considered as a return from an investment property after maintenance and mortgage interest costs.

Non-bank Lenders

Are lenders who do not hold an Australian banking licence and who do not represent a mutual bank, building property valuer.


When you acquire a new loan to take over an older one for the same asset.

Rental yield

A measurement of the percentage of income return you earn from your property.

Reverse mortgage

Is when those who are retired unlock the equity in their home and borrow against the value of their home and repay the loan when they sell their property.

Settlement date

Is the agreed date which the seller must deliver the property that was sold, and the buyer must pay the final amount that is owed.

Stamp Duty

A State Government tax based calculated by a percentage against the monetary value of the property purchased.

Standard variable rate (SVR)

Usually with a variety of features, including making extra repayments and redraw advance repayments, this type of loan is suitable for both investment and personal purposes.

Strata fees

When collective owners of a building pay a fee, usually quarterly, into an account that pays for the overall maintenance and other expenses related to the building.

Tax depreciation

Property investors can minimise their taxation payable through tax depreciation allowances available to applicable residential property owners.

Tax depreciation is an allowance for the decline in value of the assets within an investment property over time.


A value in a momentary amount of the worth of a property this is carried out by an independent professional.

Variable interest rate

A percentage charged against the sum of money borrowed as a fee paid at regular instalments. This may increase or decrease according to the cash rate.