The Australian Mortgage Glossary: Every Term, in Plain English

What is LMI (Lenders Mortgage Insurance)?

Lenders Mortgage Insurance (LMI) is a one-off insurance premium that protects the lender, not you, if you can’t repay your home loan. Australian lenders typically require it when you borrow more than 80% of a property’s value, and the cost is usually added on top of your loan. Read the full Lenders Mortgage Insurance (LMI) guide → When you are ready to see these terms in action, our step-by-step guide to buying an investment property uses most of them in one real process.

What is a comparison rate?

A comparison rate bundles a home loan’s interest rate plus most upfront and ongoing fees into a single percentage, so you can compare the true cost of different loans. Australian credit law requires lenders to display it alongside any advertised rate. Read the full Comparison rate guide →

What is LVR (loan-to-value ratio)?

Loan-to-value ratio (LVR) is your loan amount divided by the lender’s valuation of the property, expressed as a percentage. Borrow $480,000 against a $600,000 home and your LVR is 80%. It’s the single number that most shapes your interest rate, LMI bill and approval odds. Read the full Loan-to-value ratio (LVR) guide →

What is an offset account?

An offset account is an everyday transaction account linked to your home loan. Every dollar in it is subtracted from your loan balance when daily interest is calculated — so $50,000 in offset against a $500,000 loan means you pay interest on only $450,000, while the money stays fully accessible. Read the full Offset account guide →

What is home loan pre-approval?

Pre-approval — also called conditional approval — is a lender’s written indication of how much it will likely lend you, based on your income, debts and deposit. It typically lasts 60–90 days and lets you make offers with confidence, but it is not a guarantee of final approval. Read the full Pre-approval (conditional approval) guide →

What is a guarantor home loan?

A guarantor home loan lets a family member — usually a parent — offer part of their own property’s equity as additional security for your loan. Structured well, it can get you into a home with little or no deposit and no LMI, without the guarantor handing over any cash. Read the full Guarantor home loan guide →

What is borrowing capacity?

Borrowing capacity is the maximum a lender will let you borrow, driven by income, expenses, existing debts and the serviceability buffer — not by what you feel you can afford. It differs surprisingly between lenders: the same person can be approved for amounts tens of thousands of dollars apart depending on where the application lands.

What is serviceability buffer?

The serviceability buffer is the safety margin lenders must add to your actual interest rate when testing whether you can afford a loan — currently around 3 percentage points under APRA guidance. It’s why your borrowing capacity is assessed as if rates were materially higher than today’s.

What is redraw facility?

A redraw facility lets you take back extra repayments you’ve made into your loan. It looks like an offset account but the money legally sits inside the loan and access is at the lender’s discretion — with different tax consequences for future investment properties.

What is negative gearing?

Negative gearing is when an investment property’s costs exceed its rental income, producing a loss that reduces your taxable income. The 2026 federal budget changed how new purchases of established homes are treated — covered in detail in our negative gearing guide.

What is refinancing?

Refinancing is replacing your current home loan with a new one — at the same lender (a reprice) or a competitor. The point is a sharper rate, better structure or equity release; the discipline is comparing total cost, not just the headline rate. See also: mortgage broker vs bank. Full walkthrough: refinancing in plain English.

What is bridging loan?

A bridging loan covers the gap when you buy your next home before selling the current one. You carry both debts briefly, interest is often capitalised, and the lender assesses your end debt — the position after the sale settles.

What is stamp duty?

Stamp duty is a state government tax on property transfers, scaled to the purchase price and different in every state. Concessions exist for first home buyers in most states; in Victoria it remains one of the largest single costs of buying.

What is settlement?

Settlement is the legal completion of a property purchase: funds move, the title transfers, and you get the keys. It typically happens 30 to 90 days after contracts, coordinated between your conveyancer, the lender and the seller’s side.

What is interest-only vs principal-and-interest?

Principal-and-interest repayments pay the loan down from day one. Interest-only repayments cover just the interest for a set period — lower repayments now, a faster repayment schedule afterwards, and typically a slightly higher rate. Investors use interest-only for cash flow and tax reasons; owner-occupiers mostly benefit from principal-and-interest.

What is best interests duty?

The Best Interests Duty is a legal obligation on mortgage brokers — not banks — to act in the borrower’s best interests when recommending loans. Introduced in 2021, it’s the structural reason broker advice and bank product sales aren’t the same conversation.

All definitions reviewed June 2026. General information only, not credit advice.

We work with banks. We don’t work for them.

If you’re considering a refinance, buying your first home, structuring an investment property, or just want a second opinion on your current loan — a quick conversation costs you nothing and could save you tens of thousands.

What a quick call covers

• Whether your current rate is still competitive in today’s market.
• How much you could borrow on your current income and situation.
• Which lenders are best suited to your specific circumstances.
• Whether refinancing now makes sense or whether timing matters.
• What documents you’d need to move forward if you wanted to.

No obligation, no credit check, no pressure to proceed. If we can help, we will. If your current lender is already competitive, we’ll tell you that too.