Australian Mortgage Glossary
Plain English explanations of the lending, income, liability, and compliance terms Australian mortgage brokers work with every day. Written for brokers and credit assessors, not marketing teams.
Lending fundamentals
Loan to Value Ratio (LVR)
The loan amount expressed as a percentage of the property value, used by lenders to assess risk on a home loan.
Serviceability
A lender assessment of whether a borrower can meet loan repayments from their income after accounting for expenses, existing debts, and a buffer.
Debt to Income Ratio (DTI)
Total debt divided by gross annual income, used by lenders as a supplementary risk measure alongside serviceability.
Lenders Mortgage Insurance (LMI)
An insurance premium charged to borrowers that protects the lender, not the borrower, if a high LVR loan goes into default.
Comparison Rate
A rate that combines the advertised interest rate with most standard fees to give borrowers a clearer picture of the true cost of a loan.
Offset Account
A transaction account linked to a home loan where the balance reduces the loan principal used to calculate daily interest.
Redraw Facility
A loan feature that lets a borrower withdraw extra repayments they have made above the scheduled minimum.
Principal and Interest (P&I)
A loan repayment structure where each instalment reduces both the loan balance and the accrued interest.
Interest Only Loan
A loan where the borrower pays only the interest charge for a set period, leaving the principal balance unchanged.
Fixed Rate Loan
A home loan where the interest rate is locked in for a set period, typically between one and five years.
Variable Rate Loan
A home loan where the interest rate moves up or down over time in response to market conditions and lender pricing decisions.
Split Loan
A home loan divided into two or more portions with different rate types or terms, most commonly part fixed and part variable.
Bridging Finance
A short term loan that funds the purchase of a new property before the sale of an existing property has settled.
Income and employment
PAYG Income
Income received as a Pay As You Go employee where tax is withheld by the employer before the wage is paid.
ABN Income
Income earned by a sole trader, partnership, company, or trust operating under an Australian Business Number.
Year to Date (YTD) Income
The cumulative gross income an employee has earned since the start of the financial year, shown on each payslip.
Base Salary
The fixed regular component of a PAYG employee income, excluding overtime, bonuses, commissions, and allowances.
Overtime Income
Pay received for hours worked beyond a standard contract, usually at a penalty rate above base hourly pay.
Casual Employee Income
Income earned by an employee engaged on a casual basis, typically with no guaranteed hours and a casual loading on the hourly rate.
Commission Income
Variable income earned as a percentage of sales or deals closed, typically paid on top of a base salary in roles like real estate or car sales.
Bonus Income
Discretionary or performance based payments made in addition to base salary, usually paid annually or biannually.
Rental Income
Income earned from leasing out an investment property to a tenant, usually collected monthly or fortnightly.
Self Employed Income
Business income earned by borrowers operating under an ABN as sole traders, through a company, or via a trust structure.
Liabilities and credit
Credit Report
A record of a borrower credit history held by Australian credit reporting bodies.
HECS HELP Debt
A debt owed to the Commonwealth for higher education tuition, repaid through the tax system once income exceeds a threshold.
Buy Now Pay Later (BNPL)
A short term instalment credit product that lets consumers split a purchase into equal instalments without interest.
Personal Loan
An unsecured or secured loan for a fixed amount repaid over a set term with regular repayments.
Car Finance
A loan or lease arrangement used to finance the purchase of a motor vehicle.
Credit Card Limit
The maximum amount a credit card holder can spend on a card, whether or not the balance is drawn.
Dishonour Fees
Fees charged by a bank when a direct debit or scheduled payment fails because the account has insufficient funds.
Property and schemes
Stamp Duty
A state based tax payable on the transfer of property, calculated as a percentage of the purchase price.
First Home Owner Grant (FHOG)
A state or territory based cash grant paid to eligible first home buyers purchasing or building a new residential property.
Guarantor Loan
A home loan where a family member provides their own property as additional security to support the borrower.
Compliance and regulation
Notice of Assessment (NOA)
A statement issued by the Australian Taxation Office confirming the income declared on a lodged tax return and the tax assessed.
Responsible Lending
The legal framework under the National Consumer Credit Protection Act requiring lenders and brokers to assess whether a loan is not unsuitable for the borrower.
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