Mortgage brokers glossary

Short, plain-English definitions of the terms you'll meet when choosing a mortgage broker provider in SYDNEY.

What is a comparison rate?: A comparison rate is a standardised percentage that combines a loan's advertised interest rate with all ongoing fees to show the true annual cost of borrowing.
What is a credit representative?: A credit representative is a person authorised to act and provide credit assistance on behalf of a licensed credit provider or broker under that entity's Australian Credit Licence.
What is a fixed rate loan?: A fixed rate loan is a mortgage where the interest rate remains constant for a specified term, meaning your repayments stay the same throughout that period regardless of market rate changes.
What is a guarantor loan?: A guarantor loan is a mortgage where a family member pledges their property as security alongside the borrower's own equity, allowing the lender to reduce or waive lender's mortgage insurance requirements.
What is a lender's valuation?: A lender's valuation is the bank's own assessment of a property's value, conducted to determine how much they will lend against it and whether the loan represents an acceptable risk.
What is a lenders panel?: A lenders panel is the set of banks, non-bank lenders, and other financial institutions a mortgage broker is accredited with and can submit loan applications to for clients.
What is a loan serviceability buffer?: A mandatory addition to the interest rate used by lenders to calculate whether a borrower can afford mortgage repayments, set by APRA to stress-test the loan application against rising rates or income changes.
What is a mortgage aggregator?: A mortgage aggregator is a company that provides brokers access to multiple lender panels, trading platforms, software systems, and compliance frameworks needed to operate and settle loans.
What is a redraw facility?: A redraw facility lets a home loan borrower withdraw money they have paid above the minimum required repayment amount, accessing those extra contributions as needed.
What is a split loan?: A split loan is a mortgage divided into two or more portions, typically one at a fixed interest rate and one at a variable rate, allowing borrowers to benefit from both rate certainty and refinancing flexibility.
What is a stamp duty concession?: A stamp duty concession is a reduction or exemption in the property transfer tax payable in NSW, offered to first home buyers who meet specific eligibility criteria set by the state government.
What is a variable rate loan?: A variable rate loan has an interest rate that fluctuates based on the lender's pricing and the Reserve Bank's cash rate movements, causing repayments to rise or fall over the loan term.
What is an Australian Credit Licence (ACL)?: An Australian Credit Licence (ACL) is the mandatory authorisation that permits individuals and businesses to provide credit services, including mortgage broking, under Australian financial services law.
What is an offset account?: An offset account is a transaction account connected to a home loan where the balance held in the account reduces the interest calculated on the loan amount.
What is best interests duty (BID)?: Best interests duty (BID) is a mandatory legal obligation under the National Consumer Credit Protection Act requiring Australian mortgage brokers to act in the client's best interests when providing credit assistance.
What is genuine savings?: Genuine savings are funds accumulated and held over a set period that lenders verify as evidence of regular saving discipline and financial commitment before granting a mortgage.
What is lenders mortgage insurance (LMI)?: Lenders mortgage insurance is a one-off insurance premium charged by lenders when a home loan exceeds 80% of the property value, protecting the lender against borrower default.
What is loan to value ratio (LVR)?: Loan to value ratio (LVR) is the percentage of a property's purchase price or value that a lender will advance as a loan, calculated by dividing the loan amount by the property value and multiplying by 100.
What is pre-approval?: Pre-approval is a conditional confirmation from a lender that you meet their lending criteria and can borrow up to a specified amount, subject to verification of your final details at settlement.
What is principal and interest vs interest only?: Principal and interest (P&I) requires repayment of both the loan balance and accrued interest, while interest-only (IO) payments cover only the interest charged, leaving the principal unchanged.
What is rentvesting?: Rentvesting is the practice of renting your own home while simultaneously owning an investment property in another location, typically to access better neighborhoods, flexibility, or financial advantages.
What is serviceability?: Serviceability is a lender's evaluation of whether a borrower can afford to repay a loan based on their income, living expenses, and other financial obligations.
What is the First Home Guarantee Scheme?: An Australian government scheme that allows eligible first home buyers to purchase property with a deposit as low as 5 percent without paying lenders mortgage insurance (LMI).
What is the NCCP Act?: The National Consumer Credit Protection Act (NCCP Act) is Australian federal legislation that sets minimum standards for credit licensing, responsible lending practices, and consumer protection in the credit and mortgage industry.