Please note that these are a general explanation of the meaning of terms used in relation to home loans or mortgages.
The wording of loan terms and conditions may use different phrases or terms, and you should read the terms and conditions of the relevant loan to understand the features and cost of that loan. You cannot rely on these terms to the part of any loan you may purchase.
Refer to the product disclosure statement (PDS) and Canstar’s Financial Services and Credit Guide (FSCG).
What is a comparison rate?
A comparison rate is an interest rate figure that represents the total annual cost of the loan, including the annual interest rate, monthly repayments, and most ongoing and upfront fees and charges. On the Canstar website, all comparison rates for home loans are based on a $150,000 loan over 25 years. Learn about comparison rates.
What is home loan pre-approval?
Home loan pre-approval is an initial approval process where the bank provides a borrower with an estimate of how much they could borrow, based on information they have provided to the bank. Find out how to get home loan pre-approval.
What is Lenders Mortgage Insurance (LMI)?
Lenders Mortgage Insurance is a type of insurance that the loaning institution takes out in case of default from the borrower, which the borrower must pay for. Usually applies to home loans with a higher LVR (more than 80%). Learn about LMI and how to avoid it.
What is a credit rating (credit score)?
A credit rating is an assessment of the credit-worthiness of individual borrowers, based on their borrowing and repayment history (credit report). Lenders consider your credit rating when deciding whether or not to give you a loan, how much to loan you, and what interest rate you will pay. Check your credit rating.
What is LVR (Loan to Value Ratio)?
The Loan to Value Ratio (LVR) is the maximum proportion of the value of your home that can be loaned out to you. For example, a bank may approve your loan for 80% of the property value, in which you must pay the remaining 20% as your deposit. Find out how LVR affects your interest rate and LMI.
What is equity?
Equity is the residual claim to ownership that the purchaser holds. For example, when an owner has purchased a house with a loan for $100,000 and has made repayments of $40,000, the owner has equity on the house of $60,000.
What is the First Home Owner Grant (FHOG)?
The First Home Owner Grant (FHOG) is a government grant given to first home buyers. Learn what first home owner grants are available in your state or territory.
What is the First Home Loan Deposit Scheme?
The First Home Loan Deposit Scheme (FHLDS) is a form of government assistance aimed at helping eligible home buyers get a leg up onto the property ladder for the first time.
The scheme allows some low- and middle-income earners to secure a partially government-guaranteed loan with a deposit of as little as 5% of a property’s value, without needing to pay for Lender’s Mortgage Insurance (LMI).
Applications opened on 1 January, 2020 at Commonwealth Bank and National Australia Bank, while non-major lenders start accepting applications from 1 February.
What is a variable rate?
A variable home loan interest rate fluctuates according to the official cash rate set by the Reserve Bank of Australia. The rate can go up or down over time, varying your repayments. These loans allow for more flexibility and options. Learn about variable rate home loans.
What is a fixed rate?
A fixed rate home loan allows a borrower to lock in an interest rate for a particular period of time, typically from 1 year up to 5 years. The interest rate that the borrow pays will remain the same for that amount of time, regardless of changes in the RBA cash rate. Learn about fixed rate home loans.
What is a home loan guarantor?
If someone “goes guarantor” on your loan, it means that they are promising (“guaranteeing”) that they will be liable for the loan if repayments are not made. The guarantor also means they must be able to demonstrate their own capacity to repay your loan. Learn about guarantors on home loans.