The Ultimate A-Z Glossary of Australian Property & Mortgage Jargon

Ever feel like you need a translator when dealing with real estate agents and mortgage brokers? What are all these abbreviations and jargon they throw around? It’s designed to be confusing, but it doesn’t have to be. This is your ultimate guide to decoding the language of property in Australia, written in plain English.

A

Account Fees

The regular fees a lender charges you to manage your home loan account. Always ask what they are, as they can add up over 30 years.

Amortisation Period

The total length of time you have to repay your loan. For most home loans in Australia, this is 30 years.

APRA (Australian Prudential Regulation Authority)

The main financial regulator in Australia. They set the rules for banks to ensure the financial system is stable. Their rules can impact how much you can borrow.

Arrears

A fancy word for being behind on your loan repayments. Avoid this at all costs, as it damages your credit score.

B

Body Corporate

The company that manages the common areas of a strata property (like an apartment building or townhouse complex). You'll have to pay them fees, also known as strata fees, to cover insurance and maintenance.

Bridging Loan

A short-term loan that helps you "bridge" the financial gap between buying a new property and selling your old one.

Borrowing Power

The maximum amount a lender will give you. It's based on your income, expenses, debts, and the bank's own secret assessment criteria.

C

Capital Gains Tax (CGT)

A tax you pay on the profit you make when you sell an investment property. Your main home (Principal Place of Residence) is generally exempt from this tax.

Capital Growth

The increase in the value of your property over time. This is the main goal for many long-term property investors.

Comparison Rate

The "real" interest rate. It includes the headline interest rate plus most of the fees the lender charges. By law, lenders have to show you this rate so you can compare loans more easily.

Conveyancing

The legal process of transferring ownership of a property from one person to another. You'll need a conveyancer or solicitor to handle the paperwork for you.

Cooling-Off Period

A short window of time (usually 2-5 business days) after you sign a contract of sale where you can back out of the purchase. Note: This does not apply if you buy at auction.

Credit Score

A number that represents your trustworthiness as a borrower. A higher score means you're seen as lower risk and are more likely to be approved for a loan.

D

Default

When you fail to make your loan repayments. This is a serious situation that can lead to the bank repossessing your property.

Deposit

The amount of money you contribute to the purchase of a property. The bigger your deposit, the less you have to borrow and the less interest you pay.

Depreciation

A tax deduction available to property investors for the decline in value of the building and its fixtures over time. It can be a powerful tool to improve your cash flow.

DTI (Debt-to-Income Ratio)

The ratio of your total monthly debt payments to your gross monthly income. APRA has a soft cap of 6x for most people. If your DTI is too high, you'll be rejected, even if you can afford the repayments.

E

Equity

The portion of your property that you actually own. It's the difference between the property's current market value and the amount you still owe on your loan.

Establishment Fees

A one-off fee charged by the lender to set up your home loan.

F

FHOG (First Home Owner Grant)

A government grant available to eligible first home buyers to help with the cost of buying or building a new home.

Fixed Rate

An interest rate that is locked in for a set period (usually 1 to 5 years). Your repayments won't change during the fixed period, giving you certainty for your budget.

G

Guarantor

Someone (usually a parent) who uses the equity in their own property as security for your loan. This can help you avoid paying LMI if you have a small deposit.

H

HEM (Household Expenditure Measure)

A benchmark banks use to estimate your living expenses. Even if you live cheaply, banks will often use this higher measure, which can reduce your borrowing power.

I

Interest Only

A type of loan repayment where you only pay the interest on the loan for a set period, not the principal. This results in lower repayments initially, but you're not paying down your debt.

L

Landlord

The owner of a property who rents it out to a tenant.

LMI (Lenders Mortgage Insurance)

Insurance that protects the lender if you default on your loan. You have to pay for it, usually when your deposit is less than 20% of the property value (i.e., your LVR is over 80%).

LVR (Loan to Value Ratio)

The percentage of the property's value that you are borrowing. For example, if you're buying a $500,000 property with a $400,000 loan, your LVR is 80%.

M

Mortgage

The legal agreement between you and the lender, where you give them the right to take your property if you fail to repay the loan.

N

Negative Gearing

When the rental income from your investment property is less than your expenses (like interest and maintenance). You can often claim this loss as a tax deduction against your other income.

O

Offset Account

A transaction account linked to your home loan. The money in this account "offsets" the amount you owe on your loan, reducing the interest you pay. It's like a savings account that saves you interest.

Off-the-plan

Buying a property before it has been built, based on the plans and designs. This carries different risks compared to buying an existing property.

P

P&I (Principal and Interest)

The standard type of loan repayment, where you are paying back both the principal (the amount you borrowed) and the interest on the loan.

PPoR (Principal Place of Residence)

The home you live in. It's generally exempt from Capital Gains Tax.

Private Treaty

The most common way property is sold. You make an offer to the seller (usually via the real estate agent) and negotiate a price.

Property Manager

A real estate agent who manages your investment property for you. They find tenants, collect rent, and arrange repairs, usually in exchange for a percentage of the rental income.

R

Redraw Facility

A feature of some loans that allows you to withdraw any extra repayments you've made on your loan.

Refinance

The process of moving your existing home loan to a new lender, usually to get a better interest rate, better features, or to access equity.

Rental Income

The money you receive from your tenants for living in your property.

Rental Yield

The return on your investment property, expressed as a percentage. It's calculated by dividing the annual rental income by the property value. Higher is generally better for cash flow.

S

Settlement

The final step in the property buying process where ownership is officially transferred to you and the lender hands over the money to the seller.

Stamp Duty

A large government tax you pay when you buy a property. The amount varies by state and the value of the property. It's a significant upfront cost.

Strata

A system of ownership for apartment blocks and townhouse complexes, where you own your individual unit and share ownership of common areas.

T

Tenant

The person who rents and lives in the property.

Title

A legal document that proves who owns a property.

U

Unconditional Approval

The final stage of a loan application, where the lender has verified all your information and formally agrees to lend you the money. You're now safe to buy!

V

Vacancy Rate

The percentage of rental properties in a specific area that are currently empty and available for rent. A low vacancy rate (under 2-3%) indicates high demand from tenants.

Valuation

The lender's assessment of what a property is worth. This can sometimes be lower than what you've agreed to pay, creating a valuation shortfall.

Variable Rate

An interest rate that can move up or down over the life of the loan, following the market and the RBA's cash rate.

Vendor

The person selling the property. In plain English, the seller.

Y

Yield

See Rental Yield.