Mortgage Broker Glossary
Navigating the mortgage process can be overwhelming, especially with all the industry jargon.
Our Mortgage Broker Glossary simplifies key terms, helping you make informed decisions with confidence.
Key Terms Explained
The process of gradually repaying a loan through scheduled payments over time, typically with a portion going towards the interest and the remainder reducing the principal balance.
A fee charged by lenders when a borrower submits a mortgage application. This fee covers administrative costs related to processing the application.
The interest rate used by lenders to assess a borrower’s ability to repay a loan. It’s often higher than the actual rate applied to the loan and ensures the borrower can still afford repayments if rates increase.
A conditional agreement from a lender indicating they are willing to lend a specific amount based on an initial assessment of the borrower’s financial position. It’s not a full loan approval.
Any property or item of value owned by a borrower, such as a house, car, or savings, which can be used to secure a loan or improve creditworthiness.
A type of loan where the lender can demand full repayment at any time, and interest rates are typically variable.
A fee charged by a mortgage broker for their services in finding and securing a loan for the borrower. This can be charged upfront or as a commission from the lender.
The amount of money invested in a property or business, excluding any debt or loans.
The official interest rate set by a central bank (such as the Reserve Bank of Australia) that influences the cost of borrowing money and impacts overall market interest rates.
The legal process involved in transferring ownership of a property from the seller to the buyer, typically managed by a solicitor or licensed conveyancer.
A legal period during which a buyer can cancel a purchase agreement without penalty, usually a few days after signing the contract. Applies to private sales but not auctions.
A financial measure used by lenders to determine the proportion of a borrower’s income that goes towards servicing debt. A lower DTI ratio may improve a borrower’s chances of approval.
The upfront payment made by the borrower towards the purchase of a property. A deposit typically ranges from 5% to 20% of the property’s purchase price.
The difference between the market value of a property and the amount owed on it. If a property is worth $500,000 and the mortgage is $300,000, the equity is $200,000.
A mortgage with an interest rate that remains constant for a specified period (typically 1-5 years), providing borrowers with predictable repayments.
A person who agrees to take responsibility for a borrower’s debt if the borrower is unable to repay the loan. Typically, a parent or close relative.
A conditional agreement from a lender to lend a borrower a specific amount based on initial financial information, subject to further documentation and a property valuation.
A loan where the borrower only pays the interest for a certain period, with the principal balance remaining unchanged during that time.
Insurance that protects the lender in case the borrower defaults on a loan, typically required when the borrower’s deposit is less than 20% of the property’s value.
A financial term used to assess the risk of a loan, calculated by dividing the loan amount by the property value. A higher LVR represents higher risk.
A professional who acts as an intermediary between a borrower and potential lenders to help find a suitable mortgage loan.
The periodic payment made by the borrower to the lender, which includes both interest and principal portions. Repayments are typically made on a weekly, fortnightly, or monthly basis.
A bank account linked to a mortgage where the balance of the account offsets the loan balance, reducing the interest payable on the mortgage.
The original amount of money borrowed or the remaining balance of the loan, excluding interest.
The process of replacing an existing loan with a new loan, often to secure a better interest rate or adjust the terms of the loan.
A type of loan available to homeowners, usually seniors, where the lender provides funds based on the equity in the property, which is repaid when the homeowner sells the property or passes away.
The final stage of a property transaction, where ownership is officially transferred from the seller to the buyer, and the loan funds are disbursed to the seller.
A state government tax imposed on property purchases, calculated as a percentage of the property’s purchase price or market value.
A mortgage where part of the loan is on a fixed interest rate and part of the loan is on a variable interest rate.
A loan where the interest rate can change over time, typically in response to changes in the market or central bank rates.
A legal document provided by the seller during a property transaction that discloses important information about the property, including title details, zoning, rates, and legal matters.
An assessment of the value of a property conducted by a qualified valuer, which helps the lender determine how much they are willing to lend.
