Home Loan Glossary
Buying a home in Sydney involves a lot of terminology that can be confusing, from LVRs and LMI to pre-approvals and guarantor loans. This glossary breaks down common home loan terms in plain language so you can understand what they mean and how they affect your borrowing.
We’ve designed it to be easy to navigate, and directly relevant to the Sydney property market. Think of it as your go-to reference for all the mortgage jargon you’ll encounter along the way.
A
Approval in Principle
Another term for pre-approval. It means a lender has conditionally approved your loan based on the information provided, subject to final checks such as valuation and verification of documents.
Having an approval in principle can provide greater confidence when making an offer on a property.
B
Borrowing Capacity
The maximum amount a lender may allow you to borrow based on your income, expenses, existing debts and overall serviceability.
Borrowing capacity can vary significantly between lenders due to different assessment policies.
C
Construction Loan
A loan used to build a new property. Funds are released in stages (known as progress payments) as construction milestones are completed.
Contract of Sale
The legally binding document outlining the agreed purchase price, settlement date and conditions between buyer and seller.
Cooling-Off Period
A legally defined period after signing a contract where a buyer may withdraw from the purchase, subject to applicable penalties and state legislation.
D
Debt Consolidation
Combining eligible debts such as personal loans, credit cards or buy-now-pay-later accounts into your home loan to simplify repayments and potentially reduce interest costs.
Deposit
The upfront contribution you make toward a property purchase, usually expressed as a percentage of the purchase price.
Discharge
The process of finalising and closing an existing mortgage, typically when refinancing or selling a property. A discharge fee may apply.
E
Equity
The difference between your property’s current market value and the amount you owe on your mortgage.
Equity can sometimes be accessed for renovations, investment purchases or debt consolidation.
F
Fixed Rate
An interest rate that remains the same for a set period, providing certainty around repayment amounts during that time.
First Home Owner Grant / Scheme
Government assistance available to eligible first home buyers in NSW, designed to help reduce upfront purchase costs. Eligibility criteria and property thresholds apply.
G
Guarantor Loan
A loan supported by a family member who provides additional security using their property.
I
Interest Only
A repayment structure where you pay only the interest component of the loan for a set period. After this period, repayments increase to cover both principal and interest.
L
Lenders Mortgage Insurance (LMI)
Insurance a lender may require if your deposit is below 20% of the property value.
LMI protects the lender, not the borrower. In some cases, certain professions or loan structures may qualify for partial or full waivers.
Loan to Value Ratio (LVR)
The percentage of the property’s value you are borrowing.
For example, purchasing a $800,000 property with an $80,000 deposit results in a 90% LVR.
O
Offset Account
A savings account linked to your home loan. The balance held in the offset account reduces the amount of interest charged on your mortgage.
P
Pre-Approval / Conditional Approval
A lender’s conditional approval based on an initial assessment of your financial position.
A fully assessed pre-approval can reduce the risk of delays or issues once you have signed a contract.
Principal and Interest
A standard repayment structure where each payment reduces both the outstanding loan balance (principal) and the interest charged.
R
Redraw Facility
A feature that allows you to access additional repayments you have made on your loan, subject to lender policies.
S
Serviceability
A lender’s assessment of your ability to meet loan repayments, based on income, living expenses, debts and financial commitments.
Settlement
The date ownership of the property officially transfers to the buyer and mortgage funds are released to the seller.
Split Loan
A mortgage divided into two or more portions, typically combining fixed and variable interest rates.
This structure allows borrowers to balance repayment certainty with flexibility.
Stamp Duty
A government tax payable when purchasing property in NSW.
The amount depends on the purchase price and whether you qualify for concessions or exemptions.
T
Title Deed
The legal record confirming ownership of a property.
V
Valuation
An independent assessment of a property’s market value conducted on behalf of the lender prior to final loan approval.
Variable Rate
An interest rate that can increase or decrease depending on market conditions and lender pricing decisions.