Reference
Home loan glossary
The words lenders and brokers use can make a simple idea sound complicated. Here are the terms that come up most often when you take on or refinance a home loan, defined in plain English.
Last updated July 2026- Amortisation
- The gradual paying down of a loan through regular repayments that cover both interest and principal over the term.
- Best interests duty
- A legal obligation on mortgage brokers in Australia to act in the borrower’s best interests when recommending a loan.
- Break cost
- A fee a lender may charge for exiting a fixed rate loan early, which can be significant depending on rates at the time.
- Comparison rate
- A single percentage that combines the interest rate with most standard fees, designed to make loans easier to compare. It is based on a standard example loan.
- Conditional approval
- Also called pre approval. A lender’s indication of how much it may lend, subject to a property valuation and final checks.
- Equity
- The share of your property you own outright, calculated as the property value minus the loan balance.
- Fixed rate
- An interest rate locked for a set period, giving repayment certainty but usually less flexibility and possible break costs.
- Genuine savings
- Funds a borrower has accumulated and held over time, which lenders often treat as evidence of financial discipline.
- Interest only
- A repayment type where you pay only interest for a period, so the loan balance does not reduce during that time.
- Lenders mortgage insurance (LMI)
- A one off cost, usually payable when the deposit is below 20 percent, that protects the lender rather than the borrower if a loan defaults.
- Loan to value ratio (LVR)
- The loan amount as a percentage of the property value. A lower LVR generally means less risk to the lender and can mean better terms.
- Offset account
- A transaction account linked to a home loan, where the balance reduces the amount of the loan that interest is charged on.
- Ongoing fees
- Regular fees such as monthly or annual account fees, which add to the true cost of a loan beyond the interest rate.
- Principal
- The amount you actually borrow, separate from the interest charged on it.
- Principal and interest
- A repayment type where each payment reduces both the interest owed and the loan balance.
- Redraw
- A feature that lets you withdraw extra repayments you have made ahead of schedule, subject to the lender’s conditions.
- Refinancing
- Replacing an existing home loan with a new one, with the same or a different lender, usually to save money or gain features.
- Serviceability
- A lender’s assessment of whether you can afford repayments, including a buffer applied above the actual interest rate.
- Settlement
- The point at which the property purchase or loan is finalised and funds change hands.
- Split loan
- A loan divided into portions, commonly part fixed and part variable, to balance certainty and flexibility.
- Stamp duty
- A state government tax on property transfers, which varies by state, price and buyer type, with concessions for some buyers.
- Trail commission
- An ongoing payment a lender makes to a broker over the life of a loan, on top of any upfront commission.
- Variable rate
- An interest rate that can move up or down over time, offering flexibility but less certainty than a fixed rate.
Terms in context
Definitions make more sense inside a real decision. See how these terms play out across the guides.
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General information only
Master Mortgage Broker Sydney is an independent education website. It is not a mortgage broker, does not arrange loans and does not provide financial or credit advice. Content here is general in nature and does not consider your personal objectives, situation or needs. Always confirm details with a licensed professional before acting.