No, it’s not just you. Banking jargon can be unnecessarily confusing for those of us who don’t have a financial background. Fear not; we’ve collated a handy resource for all those terms and phrases that get our brains muddled when dealing with different banks and lenders for finance.

– A –

Annual percentage rate

This is a rate that indicates the annual interest rate you will pay on your loan. Note that this rate excludes the lender’s fees and charges.

Approval in Principle

This is an indication from a lender that they will be willing to lend you a certain amount of money, subject to specified conditions. Approval in Principle is not a guarantee that your loan will be fully approved. The lender will only approve the loan if certain conditions are met. For example, Approval in Principle is usually subject to the lender’s own valuation of the property.

There are likely to be other conditions too.

Generally, presuming that your circumstances don’t change, your pre-approval will last for around three months. This may differ from lender to lender.


This is an increase in a property’s market value. It’s the opposite of ‘depreciation’, which is a fall in market value of the property.

– B –

body corporate

This is an organisation that’s in charge of managing and maintaining common areas in a multi-dwelling property, for example apartment blocks. This type of property may have shared driveways, parking areas, stairwells, or lifts. Generally speaking, when you buy an apartment or unit, you automatically become a member of the body corporate. Being a member means you have certain legal and financial duties. You may also have to pay fees to help cover the costs of maintaining the common body corporate areas.

break costs

These are costs you may need to pay if you terminate a fixed-rate home loan early. This may happen if you repay your loan in full or in part, or refinance your loan before the end of the agreed term. Be aware — break costs can be significant.

The lender should be able to give you an estimate of the likely cost on the day that the early repayment occurs.

building inspection

This is an examination of a house to find out whether it has any serious defects or structural problems. The idea is to get a heads up on any serious problems with the house that may require substantial repair work. Once the inspection is complete, the buyer can make an informed decision on whether to proceed with the purchase.

Generally speaking, building inspections should be carried out by an appropriately qualified professional.

building regulations

These are laws designed to ensure buildings are safe and liveable.

Building regulations usually specify the minimum standards a building has to meet in terms of its design and build quality.

Building regulations differ depending on the state or territory.


 capital gains tax

Capital gains tax (CGT) is a tax you may have to pay when you make a profit from the sale of a property. Generally, you won’t have to pay CGT when you sell the home you live in. You may have to pay CGT if you sell an investment property.

Check the Australian Taxation Office website for more info on CGT.


Sometimes, a person other than the owner may have a legal interest or claim over a property. A caveat is a legal notice placed on the certificate of title (see below) that warns a potential buyer or lender about that person’s claim. When a caveat is in place, it may prevent the property from being sold until the claim has been resolved.

It’s important to seek legal advice on why a caveat may need to be put in place, or how to have one removed.

certificate of title

This is a legal document that identifies a property’s registered owners. It should also include details of any mortgagees as well as legal notices such as caveats.

clearance rate

You’ll hear this one in the media quite a lot. The clearance rate is the proportion of properties that are successfully sold at auction in a suburb or region, within a certain period.

 comparison rate

There are countless types of home loans out there, and each of them may have different interest rates and fees. That’s where the comparison rate comes in. It includes interest as well as lender’s fees and charges that apply for the life of the loan. These are presented as an annual percentage rate to make it easier to compare the cost of loans across different lenders.

conditional approval

Generally speaking, this is the same thing as Approval in Principle.

conditional offer

This is an offer to buy a property if certain conditions are met. If the seller accepts the offer, you may be legally required to follow through and buy the property once the conditions are met.

If the conditions aren’t met, talk to your lawyer or conveyancer about what to do next.

construction loan

These are loans designed for people who are intending to pay a builder to construct their home. A construction loan lets you access your funds as the building work progresses. This is important because builders usually require part payment at specific stages of the building work.

contract of sale

This is a written agreement between a buyer and seller of a property. It usually includes important contractual terms relating to purchase price, settlement date, and fixtures and fittings included in the sale.

As a rule, the contract of sale also describes the condition the property needs to be in at settlement. When it comes to contracts of sale, it’s usually a good idea to seek a review from a conveyancer or lawyer to help you understand the terms and conditions of the contract.


Transferring ownership of a property isn’t quite as simple as handing over the cash and taking the keys. There’s a bunch of legal and admin tasks that need to be done beforehand. ‘Conveyancing’ is the term used to describe these tasks.

It usually includes things like:

  • preparing and lodging necessary legal documents
  • checking any restrictions on the property title
  • liaising with your lender
  • representing you on settlement day.

Most people use a conveyancer or solicitor to do these things for them.

cooling-off period

Generally, when you sign a contract of sale, you’re legally bound to follow through with the purchase — but there are some exceptions.

One possible exception is a ‘cooling off period’. This is a set number of days during which you may be able to cancel the contract of sale after you’ve signed it. If you do this, you may have to pay the seller a termination fee, depending on the terms in the contract of sale.

Cooling-off periods are a legal requirement in most states and territories. The contract of sale must include information about the cooling-off period. For example, there is generally no cooling-off period when a property is sold via auction process.

Talk to your lawyer or conveyancer to ensure you understand how cooling-off periods work in your state or territory.


deposit bond

Buying a property involves signing a contract of sale. When you do this, you may also need to pay the seller a deposit. But what if your money is tied up in an investment or term deposit?

A deposit bond may address this problem for you. Basically, it’s a substitute for cash that can be used to pay the deposit — but be aware that some sellers don’t accept them.

A deposit bond may be called by different names depending on the lender (e.g. deposit guarantee).


These are costs and fees that must be paid during the conveyancing process. For example, the relevant government body may charge a fee to provide your conveyancer or lawyer with necessary information about a property’s title.

These fees are generally passed on to you, which means you have to pay them on top of your conveyancer’s or lawyer’s fees. Be sure to ask your lawyer or conveyancer up front for an estimate of the cost of disbursements.

discharge fee

There are certain costs involved in discharging a mortgage. Usually, your lender will pass these on to you in the form of a discharge fee.

discharge of mortgage

Once a home loan has been paid in full or refinanced, there are certain legal tasks that will need to be performed.

  • If the home loan has been paid in full, the borrower may want the lender’s mortgage notice to be removed from the property’s title.
  • If a property owner refinances the home loan, the new lender will need the mortgage notice to be changed.

Updating the property’s title involves submitting paperwork to the relevant government body. The process and time frame may vary depending on the state or territory.


If your home loan is approved, your lender won’t simply pay the cash straight into your bank account for a property purchase. Instead, they’ll release the funds to the seller on settlement day. The release of these funds is known as ‘drawdown’.


early repayment cost

Please refer to break costs.


Equity is the market value of your property, minus the amount of your loan you still have to repay.

establishment fee

This is a fee you may be charged when your home loan is set up by your lender.

extra repayments

Your home loan agreement will state the minimum repayments you are required to make each month. Payments made over and above this amount are referred to as ‘extra repayments.’


First Home Owner Grant (FHOG)

Yes it’s true — the government gives eligible first home buyers a grant to help them buy their first home. It’s called the First Home Owner Grant (FHOG), but it works differently depending on the state or territory in which you live.

fixed rate

This is a rate of interest that stays the samefor a certain period of time — generally between 1 to 10 years. It’s different to a variable rate, which may go up or down over time.



This is a person who agrees to help you get a home loan. Generally, they’ll do this by agreeing to take on some of the responsibility if you fail to pay off your loan.

Here’s how it works:

  • Your guarantor will put forward some property as security for your loan.
  • If you default on your loan, your lender has the right to sell your guarantor’s property to recover money still owing.

Just to be clear — guarantors accept some pretty serious legal obligations. If you default on your home loan, the lender may recover outstanding amounts from your guarantor.


interest in advance

Some home loans let you pay a year’s worth of interest in advance. There may be tax advantages in doing so, depending on your financial circumstances. Usually this is an option on fixed rate residential investment property loans only.

interest-only repayment

Some loans will have a period in which you’ll repay the interest charges only — you won’t pay back any of the principal amount. This period is usually up to five years. Once the interest-only period has ended, the loan will usually revert to principal and interest repayments (meaning your repayments will increase).


land surveyor

This is someone who specialises in accurately marking out a property’s boundaries. It’s pretty important stuff — they’re the ones who determine where buildings and fences can legally be built.

Lenders Mortgage Insurance (LMI)

These days, most lenders won’t give you a home loan if your deposit is less than 20% of the lender-assessed value of the property — but LMI could be a way around this.

LMI protects your bank or lender in the event that you default on your home loan and there is a ‘shortfall’. If this happens, your lender may be able to recover the shortfall from the LMI provider — but the LMI provider may still try and recover the shortfall from you. In other words, LMI protects the lender  but it doesn’t protect you at all.

Loan to Value Ratio (LVR)

You’re probably going to hear this term a lot. Loan to Value Ratio (LVR) is the amount you need to borrow, calculated as a percentage of the lender-assessed value of the property.

The ‘lender-assessed value’ is your lender’s valuation of the property. This may be different to the purchase price.

Let’s break it down a bit more.

  • Let’s say your lender values the property at $500,000.
  • Let’s also say you have a $100,000 deposit (excluding transaction buying costs).
  • This means you need to borrow $400,000 to buy the property.

Your LVR would be calculated like this:

$400,000 ÷ $500,000 = 80%

(In the above example, we’ve simplified things by leaving out some of the fees and costs you may have to pay.)


maximum loan amount

This one’s pretty straightforward — it’s the limit on how much a lender will allow you to borrow. Your lender will come up with this figure based on a few things, including your income, living expenses and other debts.

minimum repayment amount

This is the minimum amount you need to repay on your home loan each month. The details will be in your home loan contract.


This is a fancy name for the bank or lender that’s providing you with a home loan. They’re called the ‘mortgagee’ because they hold a ‘mortgage’ over your home.

When a lender has a mortgage over your home, it usually means that they have the right to sell it if you default on your home loan.


This is someone who takes out a home loan.


This is a legal term that’s often used to describe home loans, but there’s a bit more to it than that. Under a mortgage, the property you purchase is used as security for the amount of money you borrow. This means the lender may have the right to sell the property

mortgage offset

Refer to offset account.

mortgage protection insurance

Your home loan is possibly the biggest debt you’ll ever have, but what if you become unable to work because of illness or injury? How would your family cope with the repayments?

This is where mortgage protection insurance might help. Depending on the circumstances, mortgage protection insurance may cover some or all of your repayments if you’re unable to work.


negative gearing

This is a tax deduction you could get if you own an investment property. Here’s how it works:

  • Let’s say you take out a mortgage to buy an investment property, which you then rent out to some tenants.
  • Let’s also say your mortgage repayments are $350 per week, but you only get $300 in rental income.
  • That leaves you $50 out of pocket.
  • Under negative gearing, you could claim the $50 as a deduction against other income you receive in the same financial year.

If you’re thinking about negative gearing, chat to your accountant or financial advisor for more info.


offset account

This is an account that’s linked to your home loan. The money in your offset account is ‘offset’ against your home loan balance.

Here’s how it works:

  • Let’s say you take out a $400,000 home loan.
  • You then deposit $50,000 in your offset account.
  • You’ll now be charged interest on $350,000, instead of the full $400,000.
  • This will happen for as long as the $50,000 stays in your offset account.

This offset feature is usually only available on variable rate loans. It may be available on some fixed rate term loans.

off the plan

This means purchasing a property before it’s been built. Because it doesn’t exist yet, you can’t inspect the physical property. Instead, you’re buying based on what’s in the plans.


pre-approval principal

Refer to Approval in Principle.


Simply put, this is the amount you owe on your home loan. The principal amount will get smaller over time as you pay off your home loan.

principal and interest repayment

Under this kind of repayment, you’ll pay the interest charges, as well as a portion of the principal. The principal is the amount you borrow from your lender.

property value

This relates to how much your property is worth. Lenders often talk about the ‘assessed value’ of your property, which is your lender’s valuation of your property. Valuations are usually done by a valuation specialist.


redraw facility

Some home loans let you access the extra repayments you’ve made on your home loan. This is called a ‘redraw facility’.

Here’s how it works:

  • Let’s say your minimum repayment amount on your principal balance is $1000 a month.
  • In November, you pay back $1500 — that’s $500 extra than your minimum repayment.
  • At a later date, you may be able to access and withdraw the extra $500 that you’ve repaid ahead of schedule.

Any amount in your redraw facility will reduce the balance that you owe to your lender. The balance will increase if you withdraw funds from your redraw facility.

Having a redraw facility may help you reduce your interest payments, but they’re not available on all home loans.



This is an asset that secures your home loan. If you default on your loan, the lender has a legal right to sell this asset. In other words, the security gives lenders peace of mind that they will be able to recover their money if you can’t pay back your loan.


This is the process of finalising the purchase of a property and then transferring ownership from the seller to buyer. During settlement, the remaining money owed under the contract of sale is paid to the seller. The seller then provides the certificate of title which is updated to include the new owner and mortgagor (if any).

split loans

This is a loan that’s split into two loan accounts. Part of the loan amount will sit in one account, while the rest will sit in the other account. The interest rate charged may be different for each account, for example:

  • One of the accounts may have a fixed interest rate, which stays the same for the fixed-rate term.
  • The other account may have a variable rate, which may go up and down over time. The rate may change in response to decisions made by the Reserve Bank of Australia, as well as other factors.

Fixed and variable interest rates each have advantages and disadvantages. A split loan may be a way to get the best of both worlds — but it really comes down to personal choice.

stamp duty

This is a tax you pay to a state or territory government when you buy a property. Stamp duty rates are usually tiered based on your property’s purchase price. The higher the price, the more likely you are to pay a higher rate of stamp duty. The exact amount you’ll pay depends on the state or territory you live in, and the value of your contract of sale.

stamp duty concession

This is a discount or exemption on the amount of stamp duty you may have to pay to the government when you buy a property. Stamp duty concessions may be available to eligible first home buyers in some states or territories.

standard variable loan

This is a variable interest loan that may include features like an offset account or a redraw facility.


title search

How do you know a seller has a legal right to sell a property? By doing a title search — that’s how. When you do a title search, you’re not only looking for proof of ownership. You’re also looking for legal restrictions that may prevent the sale or affect how you use the property.

Title searches are usually done through the government body that registers property ownership in your state or territory. Property buyers usually get a conveyancer of lawyer to do the search.

transfer duty

This is another name for stamp duty.



This is an assessment of your property’s value.

variable rate

This is a type of interest rate.

Variable rates may go up or down over time, which is determined by the lender you have chosen. This means your repayments can change over the life of your loan.


A ‘vendor’ is the person who is selling a property. It’s the same thing as a ‘seller’.

vendor statement

There’s only so much you can know about property by just looking at it. That’s why vendor statements are important.

As the name suggests, this is a statement made by the vendor and it includes information a buyer may want to know before they sign a contract of sale.

The statement usually includes details on any legal restrictions on the use of the property — but it may be slightly different depending on the state or territory you live in.

Vendor statements may be called something else depending on the state or territory you live in. For example, in Victoria they’re called a ‘Section 32’, while in South Australia they’re called a ‘Form 1 Disclosure Statement’.

Vendor statements are often a legal requirement, depending on the circumstances. If you’re buying or selling a house, it may be a good idea to have a conveyancer or lawyer looking after you. They’ll be able to provide advice on the vendor statement and the buying process in general.

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