Mortgage Glossary

Approved loan application made before a property is purchased.  Can be just a broad an indication of likely loan approval based purely on loan application information or can be a fully assessed loan application with supporting documents verified and approval granted subject only to the property being acceptable.

a person who formally applies for a loan.

Application - is the process of applying for a loan. Usually entails supplying a signed application form and supporting documents.

a detailed document which is submitted to a lender when applying for a loan and includes information about the applicants personal, employment and credit histories as well as documents to support their income and asset / liability position.

missed or late payments on credit facilities.

an item of value which in a loan application commonly includes property, savings, shares, super, motor vehicles and general household contents

a calculation to determine the maximum amount that can be borrowed

a short-term loan which allows a property owner to buy a property before selling an existing property.

Refers to increasing your existing borrowings with the loan proceeds controlled by the applicant.

A person who applies for and shares liability of a loan with another borrower.

In regard to Mortgage Brokers a fee paid by the lender to the broker for the successful introduction of a loan. These can be either an upfront and/or trailing commissions.

An approval with some conditions. Sometimes also called a pre-approval.

A loan specifically used for building a new property or doing renovations to an existing property. Loan funds are released in stages to the builder as the build progresses

The process of transferring a property from one owner to the next, can be done by a lawyer or licensed conveyancer

A broker and lender will complete a credit check on each applicant. This check produces a credit score and contains information about existing and past repayments and types of loans and other liabilities the applicant has.

Where one or more loans are secured by more than one property.

Something that is borrowed by one party from another. Usually money

The total of a borrower’s contribution to a property. Can also refer to the amount paid at exchange of contracts. 

The removal of a mortgage on the title of a property.

Total debt divided by total annual gross income.

A borrower's employment details are a major factor that a lender considers in their capacity to repay considerations.

Expenses are considered against income on all loan applications. Lenders will generally separate ‘essential/regular’ living expenses (ie. food, transport, utilities) and ‘non-essential’ expenses (ie. Private health insurance or private school fees) and assess them to their policies. 

The difference between your property’s value and the loan amounts secured by the property.

is terms of a mortgage, it means a lender has given loan approval or provided funds to a borrower. 

a summary of a borrower’s income, expenses, current assets and liability position.

a person purchasing their first property.

Is an interest rate on a loan that is locked in for a specific period, normally 1-5 years.

someone who provides a guarantee to a lender to assist someone else to secure a loan. Usually, a guarantor is a family member who pledges equity in a property as additional security for a first home buyer. Can also be a spousal guarantee for both security and income or if a trust or company borrower can be a director’s personal guarantee to assist the company or trust in their borrowing needs.

this is a loan scheme whereby a university student pays back their university course fees. Repayments are based on a progressively scaled percentage of annual earnings once a minimum earnings threshold is met.

similar to HECS

a benchmark of living expenses used by lenders as a proxy for minimum household living expenses based on household make up and income levels.

repayments based on just the interest charged on a loan rather than the principal and interest.  The loan balance does not reduce with interest only repayments. 

property that has been purchased with the objective of earning a return on the investment, normally through rental income or through a profit with the resale of the property in the future

is loan you share with one or more people. Each borrower is jointly liable for a joint loan.

a home prebuilt off site and delivered in secretion ready to be assembled. Also, can be a home that can be assembled more quickly than a traditionally built home.

is a financial institution or bank that offers and funds home loans. They set the terms, interest rate, repayment plan and other key characteristics of a mortgage. They each have specific borrowing guidelines to prove your creditworthiness and capacity to repay a loan.

is money you owe to another person or institution. It can be short term like a personal loan or long term like a home loan.

is a revolving credit facility that has no end term. 

Is a type of insurance that protects the lender in case of a shortfall in the value of a property in a forced sale situation. It’s usually a one-off payment at settlement and applies for most loans with an LVR over 80%.

Loan to Value Ratio is the loan amount represented as percentage of the value of the property. For e.g. a $500,000 loan on a property worth $1,000,000 is a 50% LVR.

refers to the legal instrument that can be noted on the title of a property. A mortgage secures a loan and gives the mortgagee (the lender) the right take possession of a property if their loan is in default.

An owner of a property that has granted a lender a mortgage over their property. All mortgagors must buy a party to any loan secured by their property. 

A liaison who deals with banks or other lenders to arrange a home loan on your behalf. They must act in your best interests when recommending a loan for you. 

Is your net income minus your total monthly living expenses. It is then divided by your current debt and the monthly payment amount of the home loan you want to apply for. Each lender has their own criteria for the NMS, but they are usually similar. This determines overall the amount you have of additional spending per month.

A person that is included in the loan application but isn’t requiring an interest in the propertya person that is included in the loan application but isn’t requiring an interest in the property

Applications that go to non-conforming lenders are not standard and often have quirks that mainstream lenders won’t accept

Depending on the type of improvements being made to a property, lenders will often require a Construction Loan to be taken out. Borrowers can often avoid this by specifying when their proposal doesn’t affect the supporting structure of the dwelling

Offset accounts help you save interest on your home loan. The balance in your offset will go against the amount you own on loan, so the interest you pay will be calculated on the reduced amount

When a person/s own the property they live in

A payslip is a document that’s given to an employee with each pay. It shows their total income earned for a set period. This might be from a salary, hourly wages, or commission.

A non-self-employed applicant receiving a wage from an employer

A type of income that some lenders may accept to service a loan

An application type whereby a client’s serviceability and suitability for a loan is assessed before the client has a target property

The principal of your home loan is the amount of money you borrow from your lender. The interest is the fee charged by the lender to you to borrow this money.

Your owner-occupied home. This can be an important distinction for the tax office

The process of comparing different lenders products to help you decide which one suits you and your financial situation most

When purchasing an investment property, the rental income that asset will produce in the future can be used for servicing calculations

A type of lending transaction where a property new to the client is acquired

The reason for why the funds are being used ie o/o vs inv, personal vs business will determine many things including rate, eligibility etc

Outlines to the best of the brokers knowledge all the relevant information about the loan and credit proposal they are is proposing. This includes a breakdown of the loan details as well as disclosures regarding commissions. All borrowers are required to sign before we can submit your application to the lender.