Bridging Loan – A bridging loan is a loan that allows you to have a temporary mortgage on a property you are selling at the same time as having a mortgage on the property you are buying.
Collateral – Assets that are used as security and can be liquidated in the event that you cannot meet your repayments.
Credit score – A number that represents your credit worthiness.
Debt consolidation – Combining a number of debts (like credit card debt and personal loans) into one more easily managed loan.
Default – Failure of the borrower to honour the terms of a loan agreement (e.g. failing to make mortgage repayments).
Deposit – The amount of money or equity that is put towards the purchase of a property. The difference between the purchase price of the property and the deposit will be the loan amount. (e.g. if a house is purchased for $500,000 and the deposit is $50,000, the loan is $450,000).
Equity – The difference between the value of a property and the outstanding balance of the mortgage.
Floating Interest Rate – A rate of interest charged on a mortgage that can change with market conditions without notice.
Fixed Interest Rate – An agreed interest rate that is “fixed” for a given period of time. During the fixed rate period the interest rate will not change.
Interest – The amount charged to the borrower by the lender that is not principle repayments.
Loan to Value Ratio (LVR) – The ratio of lending relative to the value of a property. (e.g. if a property is worth $100,000 and the mortgage on it is $80,000, the LVR is 80%, that’s $80,000/$100,000).
Loan Amount – The amount the borrower owes the lender.
Mortgage – A legal charge registered on a property for an amount owed to a lender. The property can be taken by the lender and sold to repay the loan if it is not repaid according to the loan terms and conditions.
Mortgage Adviser – An independent person who works for the borrower to get them the best lending deal. A mortgage adviser usually works for the borrower for free and is paid by the lender.
Payment Period – The frequency that the borrower makes repayments. Usually monthly, fortnightly or weekly.
Pre-Approval – An offer by a lender to advance a loan to a borrower given certain conditions are met.
Principal – The portion of the loan repayment that reduces the loan balance.
Refinance – Repaying one loan and replacing it with another loan.
Re-fixing – Fixing your interest rate for a period of time after a prior fixed period expires.
Registered Valuation – A written estimate report by a registered valuer of a property’s current market value.
Security – The value of a property that a lender relies upon as collateral for a loan.
Term – The total period between the advancing of a loan and the repayment of the loan.