Finance Fluff

Terminology Breakdown

Deposit

An amount of money that needs to be paid upfront to take out your loan. The deposit amount will vary, depending on the lender and amount borrowed. We can work this out for you.

Equity

Equity is the percentage of your home or asset that you actually own, often after it has been paid off. The equity of your home can be leveraged to acquire additional assets.

Interest rates

The rates that you will pay for the benefit of taking out the loan, as a percentage of the loan total (or how much you have owing once you start to pay it off). Financial providers offer different interest rates that are guided by the Reserve Bank of Australia.

LMI (lenders mortgage insurance)

This insurance will cover the organisation that lends you the money and will safeguard them should you be unable to meet your mortgage payments. LMI reduces the need for a larger deposit, helping Australians like you own their own home sooner.

Loan principal

The original amount borrowed from the bank or lending institution by someone. Often this is the large sum that doesn’t include interest or fees accrued.

LVR (loan to value ratio)

The ratio amount of money that you will be able to borrow that is compared to your property’s value (that you’re using as security), as a percentage. We’ll help you work out your loan to value ratio.

Mortgage

A mortgage is an official loan to purchase your home or property. Whatever you are purchasing with the loan money will often serve as collateral for the loan.

Mortgage protection insurance

This is the insurance that is taken out by the person/s who have borrowed the money. Its aim is to protect the borrower and help them meet their mortgage payments should something unforeseen happen to them that causes them to struggle to afford payments, such as becoming very ill or losing their job.

Settlement

Settlement is the day and time on which a financial agreement is finalised and takes effect and the buyer officially receives what they have paid for.

Stamp duty

Stamp duty is a tax applied to all property purchases that is paid to the government. The amount changes from state to state in Australia. Find out if you are eligible for stamp duty concessions here.

Term deposit

A sum of money that is held for a certain amount of time with a banking or financial institution. For the privilege of holding your money (and being able to use it) the bank will pay you a fee and is considered an investment.

Valuation

A valuation will be professionally and independently conducted to ascertain the current value of the property or asset you wish to use as security for finance. This is carried out so the bank or financial institution can be assured that they can sell the asset and recoup their loan should you default on your loan.

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