Finance Glossary

Gradual loan payoff via regular repayments. Early repayments = mostly interest, later = mostly principal.

A large lump sum due at the end of a loan term. Lowers monthly repayments but requires you to pay or refinance the balloon.

Penalty for exiting a fixed loan early. Can be $5K-$20K. Calculated on interest rate differential.

Short-term loan to buy a new property before selling your current one. Interest-only, 6-12 months.

Adding unpaid interest to the loan balance. Common during construction. Increases total debt.

A business loan secured by movable assets (equipment, vehicles). You own the asset from day one and claim tax benefits.

Asset pledged as security for a loan. If you default, lender can seize and sell the collateral.

The 'true' cost of a loan including interest rate plus fees. Lets you compare loans apples-to-apples.

Finance for building a home. Progressive drawdowns as building progresses. Interest-only during construction.

Legal process of transferring property ownership. Costs $1,200-$2,500. Includes title searches and contracts.

A number (0-1,200 in Australia) representing your creditworthiness. Higher score = easier loan approval and better rates.

Using multiple properties as security for one loan. Risky - lender can claim all properties if you default.

Combining multiple debts into one loan. Can lower repayments but extends loan term.

Your total debts divided by gross income. Banks prefer DTI below 6x. Critical for approval.

An unpaid debt reported to credit bureaus. Stays on your credit file for 5 years and damages your credit score.

Upfront payment when buying property/assets. Typically 10-20% of purchase price. Larger deposit = better rates.

Lender's fee to close your loan. Typically $300-$800. Paid when refinancing or selling.

Penalty for closing loan within 1-4 years. Common on low-rate loans. Often $500-$3,000.

The portion of your property or asset you truly own (market value minus loan balance). Can be accessed via refinancing.

Parent uses their home as security for your loan. Avoids LMI. Released once you reach 80% LVR.

Government cash grant for first home buyers. $10K-$15K depending on state and property type.

Fixed locks your interest rate for 1-5 years. Variable fluctuates with market rates. Each has pros and cons.

Someone who uses their property as security for your loan. Common for first home buyers with small deposits.

Discounted introductory rate for 6-12 months, then reverts higher. Comparison rate reveals true cost.

Loan repayments where you only pay interest for a set period (1-5 years). Principal balance stays the same. Popular with investors.

Annual cost of borrowing, expressed as percentage. Lower rate = less interest paid. Varies by loan type.

Finance for rental properties. Rates 0.3% higher than owner-occupied. Often interest-only.

Annual state tax on investment properties and second homes. Thresholds vary by state. Owner-occupied exempt.

Flexible loan where you borrow up to a limit, repay, and re-borrow. Like a credit card for property.

Insurance that protects the lender if you default on a home loan with less than 20% deposit. You pay for it, but it protects the bank.

Length of time to repay loan. Common terms: 30 years (homes), 5 years (cars). Longer term = more interest.

Loan for self-employed borrowers with limited financial documentation. Rates 0.5-1.5% higher.

The percentage of a property or asset's value that you're borrowing. A key factor in loan approval and interest rates.

Licensed professional who compares loans from multiple lenders. Free service, paid by lenders.

When property value falls below loan balance. Can't sell without bringing cash. Blocks refinancing.

Investment property strategy where rental income is less than expenses. Tax loss offsets other income.

Employer-arranged car lease using pre-tax salary. Popular with professionals earning $80K+.

A transaction account linked to your home loan. Balance offsets your loan, reducing interest charged.

Transferring your loan to a new property without refinancing. Saves discharge fees and application costs.

Conditional loan approval before you find a property or car. Tells you how much you can borrow and your rate.

The original amount borrowed, excluding interest. Each repayment reduces principal (except interest-only).

Loan repayments that pay down both the principal (amount borrowed) and interest. Most common repayment type.

Fixing your interest rate before settlement. Protects against rate rises. Usually 90 days validity.

Lets you withdraw extra repayments you've made on your loan. Handy for emergency cash access.

Replacing your existing loan with a new one (usually from a different lender) to get a better rate or access equity.

How often you make repayments: weekly, fortnightly, monthly. Fortnightly can save thousands.

Loan for retirees using home equity. No repayments while you live there. Debt grows with interest.

Loan backed by an asset (property, car). Lower rates than unsecured. Lender can seize asset if you default.

Your ability to afford loan repayments based on income, expenses, and debts. Banks test at 3% above actual rate.

The final step in a property or asset purchase where ownership transfers and the loan is finalized.

Dividing your loan between fixed and variable portions. Balances certainty and flexibility.

Government tax on property purchases. Varies by state, often $20K-$60K on median homes. First home buyer exemptions available.

Legal check to confirm property ownership and encumbrances. Costs $30-$150. Part of conveyancing.

Personal loan with no asset backing. Higher rates (8-15%). Based purely on creditworthiness.

Professional assessment of property/asset value. Required by lenders before approval. Costs $200-$600.