Mortgage and finance glossary

Plain-language definitions of Australian finance, mortgage, and lending terms.

Receivables Finance: A facility that lets a business draw cash against unpaid customer invoices instead of waiting 30 to 90 days to be paid. The financier typically advances around 80% of the invoice value upfront and pays the balance, less fees, once the customer settles. It comes in two main forms: invoice discounting, where the business keeps collecting and the arrangement stays confidential, and factoring, where the financier takes over collections.
Short Term Loans: Business finance repaid over a short window, usually 3 to 24 months, designed for urgent cash flow needs, tax bills, stock purchases or bridging a known future payment. Approval is fast and often relies on bank statement analysis rather than full financials, so the cost is higher than a standard business loan. Pricing is sometimes quoted as a flat fee or factor rate rather than an annual rate, so always convert it to an annualised cost before comparing.
Business Loans: Borrowing used to fund business activity such as working capital, equipment, premises, expansion or buying another business. Can be secured against property or business assets, which usually means a lower rate and longer term, or unsecured, which is faster to arrange but costs more. Repaid as a term loan with set repayments, or drawn as needed through a line of credit or overdraft.
Trade Finance: Funding that covers the gap between paying a supplier and being paid by the end customer, most often used by importers and exporters. The financier pays the supplier on the business's behalf and the business repays once the stock is sold, commonly on terms between 30 and 180 days. Related instruments include letters of credit, documentary collections and bank guarantees.
ABN (Australian Business Number): The 11 digit identifier issued to a business by the Australian Business Register, used for invoicing, GST and dealings with the ATO. Lenders check how long an ABN has been registered and continuously active, because ABN age is one of the main tests of how established a business is. Many self-employed loan policies require two years of ABN registration, and low doc policies commonly require at least one.
Accountant's Letter: A signed declaration from your accountant confirming aspects of your income or business position, most often used on low doc and alt doc applications where full financials are not supplied. It is a lender specific form in most cases, not a free form letter, and the accountant must be appropriately qualified and registered. It supports an application, it does not replace the lender's own assessment.
ACL (Australian Credit Licence): An Australian Credit Licence is issued by ASIC and authorises an entity to engage in credit activities, including providing credit and acting as a credit intermediary. Brokers who don't hold their own ACL operate as Credit Representatives under an aggregator's licence.
ACN (Australian Company Number): The nine digit identifier ASIC issues to a company when it is registered. Every company has an ACN, and its ABN is usually the ACN with two digits added at the front. It identifies the company as a separate legal entity, which matters in lending because the company, not the director personally, is the borrower unless a personal guarantee is given.
Add-Backs: Non-cash or one-off items added back to a business's net profit to show the true income available to service a loan, commonly depreciation, interest on debts being refinanced, owner superannuation above the minimum, and genuinely non-recurring expenses. Which add-backs a lender accepts varies significantly, and this is often where a self-employed application is won or lost.
Aggregator: The intermediary sitting between brokers and lenders. An aggregator holds the accreditations with the lender panel, supplies the software brokers use to lodge applications, processes commission payments, and usually provides the credit licence the broker operates under. Which aggregator a broker uses shapes which lenders they can actually access.
Alt Doc Loan: A loan assessed on alternative income evidence rather than full tax returns, typically an accountant's letter, six or twelve months of BAS, or business bank statements. It suits self-employed borrowers whose returns are out of date or understate current earnings. Rates sit above full doc pricing and LVR limits are usually tighter.
Amortisation: The process of paying a loan down to zero through regular repayments that cover both interest and principal. Early repayments are mostly interest and late repayments are mostly principal, which is why extra repayments made in the first few years save far more than the same amount paid later.
Annual Fee: A recurring yearly fee charged on package loans and some credit facilities, commonly a few hundred dollars. It is included in the comparison rate, which is why a package loan with a sharp headline rate can have a higher comparison rate than a basic loan. Worth reviewing each year against the discount it buys you.
Application Fee: An upfront fee some lenders charge to assess and set up a loan, sometimes called an establishment or loan approval fee. It may be waived on package loans or as a retention offer, and it sits alongside other upfront costs such as valuation and settlement fees. Always compare it against the rate on offer rather than treating a waived fee as a saving on its own.
Arrears: Being behind on repayments on a loan that is still running. Arrears are not the same as a default listing, but sustained arrears usually lead to one and will show in the repayment history on your credit report. Contact the lender early, since hardship arrangements are available and are far easier to negotiate before the account deteriorates.
ASIC (Australian Securities and Investments Commission): The Commonwealth regulator responsible for corporate, markets and financial services law, including consumer credit. ASIC issues Australian Credit Licences, maintains the public register of licensees and credit representatives, and enforces the NCCP Act. You can check any broker's licence status on ASIC Connect free of charge.
Assessment Rate: The interest rate a lender actually uses to test whether you can afford a loan, which is higher than the rate you will pay. It is generally your actual rate plus the serviceability buffer, subject to a floor rate that some lenders apply. This is why your borrowing capacity is lower than a simple repayment calculation suggests.
Asset Finance: The umbrella term for funding used to acquire a specific business asset, with that asset serving as the security. It covers chattel mortgage, finance lease, operating lease, hire purchase and novated lease. Terms usually run one to seven years and are matched to the useful life of the asset.
ATO Income Statement: The end of year summary of your salary, tax withheld and super, available through myGov. It replaced the old paper payment summary, often still called a group certificate. Lenders use it alongside payslips to confirm a full year of earnings, particularly where overtime, bonuses or allowances need an annual figure rather than a snapshot.
Auction: A public sale where the property goes to the highest bidder above the reserve. There is no cooling off period and contracts are unconditional, so finance, inspections and legal review all have to be complete before you raise your hand. A pre-approval is not the same as approval on the specific property, because the lender still has to accept the valuation.
Balance Sheet: A snapshot of what a business owns and owes at a point in time, setting assets against liabilities to show net position. Lenders use it to check whether the business is solvent, how much it already owes, and whether there are director loans or related party balances that affect the picture. It is read together with the profit and loss, because profitability and solvency are different questions.
Balloon Payment: A large lump sum owed at the end of an asset finance term, also called a residual, which lowers the monthly repayments during the term. When the term ends you refinance the balloon, pay it out, or sell the asset to cover it. If the asset has depreciated faster than the balloon assumed, you can be left owing more than it is worth.
Bank Guarantee: An undertaking by a bank to pay a third party a set amount if its customer fails to meet an obligation, commonly used in place of a cash bond for a commercial lease. The bank normally requires the amount to be secured by cash or property. It is a contingent liability, so it reduces the security available for other borrowing.
Bank Statements: Transaction records for your everyday, savings and loan accounts, usually the most recent three to six months. Lenders read them to confirm income credits, check declared living expenses against actual spending, identify undisclosed debts, and verify genuine savings. Buy now pay later use, gambling transactions and overdrawn accounts are all visible here and can affect an assessment.
Bare Trust: A holding trust used in SMSF borrowing, where a separate trustee holds legal title to the asset while the super fund holds the beneficial interest and receives the income. It exists so the lender's recourse is confined to that single asset. It must be established correctly before the contract is signed, since fixing it afterwards can trigger duty a second time.
BAS (Business Activity Statement): The form a GST registered business lodges with the ATO, usually quarterly, reporting GST collected and paid along with PAYG instalments and withholding. Lenders use lodged BAS as independent evidence of turnover in alt doc and low doc assessments, since it is reported to the ATO rather than self-declared.
Best Interests Duty (BID): A legal obligation, in force since January 2021, requiring mortgage brokers to act in the consumer's best interests and to put those interests ahead of their own where a conflict exists. In practice it means the recommended loan must be justified on your circumstances, not on which lender pays the broker more. It applies to brokers, not to bank staff selling their own products.
Binding Financial Agreement (BFA): A private written agreement between partners about how property and finances will be divided, which can be made before, during or after a relationship. It is often called a prenup when made before. To be binding, each party must have independent legal advice and the agreement must meet strict statutory requirements, and it can be set aside if those are not met.
Bonus Income: Performance or incentive payments on top of base salary. Lenders normally want two years of history and will use an average of the two years, or the lower year, rather than the most recent figure. A one off bonus with no track record is usually excluded from servicing entirely.
Borrower: The person or entity legally responsible for repaying a loan and named on the loan contract. A borrower is not necessarily the same as an owner of the property or a guarantor. Where there are several borrowers, each is normally liable for the whole debt rather than a share of it.
Borrowing Capacity: The maximum a lender will advance you based on its assessment of income, expenses, existing debts and the assessment rate it applies. It is lender specific, not a fixed number about you, and the gap between the most and least generous lender for the same borrower is often very large. Capacity is a ceiling, not a target, and borrowing to the ceiling leaves no room for rate movement.
Break Cost: The charge for exiting a fixed rate loan early, whether by refinancing, selling, or making large extra repayments. It is not a flat penalty, it is the lender's economic loss, driven by how far wholesale rates have fallen since you fixed and how long is left to run. It can be zero or it can run into thousands, so always ask the lender for a written figure before acting.
Bridging Loan: Short-term finance used to bridge the gap between purchasing a new property and selling an existing one. Bridging loans allow you to complete the purchase of your new home before your current home has settled. They typically have higher interest rates and fees than standard loans.
Building and Pest Inspection: An independent inspection of a property's structural condition and any timber pest activity, carried out before you are committed to the purchase. It is separate from a lender's valuation, which assesses value rather than condition, and one does not substitute for the other. In an auction purchase it must be done before bidding, because there is no cooling off period at auction.
Business Overdraft: A facility attached to a business transaction account that lets the balance go negative up to an agreed limit. It is designed to smooth short term timing gaps between money going out and coming in, not to fund long term assets. Interest applies only to the amount overdrawn, usually alongside a line fee on the limit.
Capital Gains Tax (CGT): Tax on the profit made when you sell an asset such as an investment property, added to your assessable income in the year of sale. A discount of 50% generally applies to assets held by individuals for more than twelve months, and your main residence is usually exempt. The rules have many exceptions, so get advice from your accountant before selling.
Capital Growth: The increase in a property's value over time, as distinct from the rental income it produces. It is unrealised until you sell, at which point capital gains tax may apply. Past growth in an area is not a reliable predictor of future growth, and forecasts should be treated with caution.
Cash Out: Increasing your loan against a property you already own in order to release equity as usable funds, commonly for a deposit on another property, renovations or business use. Lenders will ask what the money is for and may require evidence, and larger cash out requests attract more scrutiny.
Cash Rate: The interest rate set by the Reserve Bank of Australia at its scheduled board meetings, which acts as the benchmark for the cost of money across the economy. Lenders are not obliged to pass cash rate movements on in full, so your variable rate may move by more or less than the RBA's change, or at a different time.
Casual Income: Income from work with no guaranteed hours. Lenders generally want to see you in the same casual role for six to twelve months before they will use the income, and many apply a discount to allow for variability. Length of service in the same job or industry usually matters more to a lender than the fact the work is casual.
Caveat Loan: Short term funding secured by lodging a caveat on the property title rather than registering a mortgage, which makes it fast to arrange. It is among the most expensive forms of property backed finance and is normally measured in weeks or months. Only sensible with a clear, dated exit such as a settlement or a refinance already underway.
Certificate of Title: The official record of who owns a parcel of land and what interests are registered against it, including mortgages, caveats and easements. Titles are now held electronically in every Australian state. A lender's mortgage is registered on the title at settlement and removed when the loan is discharged.
Child Support Income: Maintenance received for the care of a child, whether through a Services Australia assessment or a private arrangement. Lenders that accept it usually want a formal assessment or court order plus three to six months of bank statements showing the payments arriving, and often reduce or exclude it as the child approaches the age at which payments end. Private agreements without documentation are the hardest to have counted.
Clawback: The lender's right to reclaim upfront commission from the broker if a loan is repaid or refinanced early, typically within the first two years and often on a sliding scale. It exists to discourage churn. It can also mean a broker has a financial reason to discourage you from refinancing quickly, which is exactly the conflict Best Interests Duty is meant to manage.
Commercial Property Loan: Finance secured by non-residential property such as offices, retail premises, warehouses or factories. Compared with a home loan, expect lower maximum LVRs, commonly around 65 to 75%, shorter terms, more frequent reviews, and assessment weighted to the lease income and the tenant's quality. Pricing is usually negotiated rather than advertised.
Commission Income: Income earned as a percentage of sales or settlements, common in real estate, recruitment, car sales and broking itself. Lenders generally want two years of history and average it, and treat commission more cautiously where it makes up most of total income. Consistency across the two years matters more than the size of the best year.
Company (Pty Ltd): A separate legal entity registered with ASIC, able to own assets and borrow in its own name. Company profits are taxed at the company rate and paid out as wages or dividends, so a director's personal income and the company's profit are two different figures a lender must reconcile. Lenders almost always require directors to give personal guarantees for company borrowing.
Comparison Rate: A rate that combines the interest rate with most fees and charges, expressed as a single annual percentage to help borrowers compare loans more accurately. Calculated based on a standard $150,000 loan over 25 years, so it may not accurately reflect the true cost of larger loans.
Comprehensive Credit Reporting (CCR): The regime under which lenders report positive information, including your open accounts, credit limits and 24 months of repayment history, not just negatives such as defaults. It means consistent on time repayments can improve your position, and a run of late payments shows up even where nothing was ever formally defaulted.
Conditional Approval: Approval granted subject to outstanding conditions being met, such as an acceptable valuation, LMI sign off, verification of income, or the sale of an existing property. The loan is not safe to rely on until those conditions are cleared. Also called approval in principle.
Consent Orders: Court orders that record an agreement reached between separating partners about property, finances or parenting, giving it legal force without a contested hearing. Lenders generally want to see sealed consent orders before treating a settlement as final, and the orders are also what most state revenue offices require for a duty exemption on transferring property between the parties. They are a legal document, so obtain them through a family lawyer.
Construction Loan: A loan released in stages as a build progresses rather than as a single advance at settlement. You pay interest only on what has been drawn, which keeps repayments low early on. Lenders require a fixed price building contract and council approved plans, and they value the property on its as if complete basis.
Contract of Sale: The binding agreement between buyer and seller setting out price, deposit, settlement date and any conditions such as finance or building inspection. Once signed and exchanged you are committed, subject to any cooling off period or conditions written into it. Have it reviewed before signing, because conditions cannot be added afterwards.
Contractor: Someone engaged to provide services under a contract rather than as an employee, usually invoicing through an ABN and responsible for their own tax and super. Lenders may treat a contractor as self-employed or, where the arrangement looks employment like, as PAYG with a shorter history requirement. Long term contractors in professional and trade fields often qualify under more favourable policies than a general self-employed applicant.
Conveyancer: The licensed professional who handles the legal transfer of property ownership, reviewing the contract, ordering searches, calculating adjustments and attending settlement. A solicitor can do the same work and is the better choice where the matter has legal complexity such as a deceased estate or a family law transfer. Engage one before you sign a contract, not after.
Cooling Off Period: A short window after signing a contract of sale during which a buyer can withdraw, usually forfeiting a small percentage of the price. The length and the rules vary by state and territory, and cooling off generally does not apply to purchases at auction. Confirm the specific position in your state with your conveyancer.
Credit Enquiry: A record on your credit file created each time a credit provider requests your file in connection with an application. Enquiries stay visible for five years and a cluster of them in a short period can look like distress borrowing, even where nothing was drawn down. This is why applying to several lenders at once, or repeated pre-approvals, can quietly work against you.
Credit Guide: A disclosure document your broker or lender must give you before providing credit assistance. It sets out who they are, their licence or authorisation details, the lenders they work with, how they are paid including commission ranges, and how to make a complaint. Read the commission section, it is the clearest picture of the incentives in play.
Credit Policy: The written rules a lender applies when deciding who it will lend to and on what terms, covering everything from acceptable income types and employment history to postcodes, property types and minimum credit scores. Policy is why the same application can be approved by one lender and declined by another with no change to the borrower. Matching a client to the right policy is most of what a broker's lender panel is for.
Credit Report: The file a credit reporting body such as Equifax, Experian or illion holds on you, listing your credit accounts, repayment history, applications, defaults and any court judgments. You are entitled to a free copy from each body, and to have genuine errors corrected. Lenders read it as a record of how you have handled credit, not just whether you have defaulted.
Credit Representative: A person or business authorised to engage in credit activities under someone else's Australian Credit Licence, rather than holding their own. Most mortgage brokers operate this way, appointed as a credit representative of their aggregator. The authorisation is recorded on ASIC's register and carries the same consumer protections.
Credit Score: A number derived from your credit report that summarises how a credit reporting body rates your risk. Each body uses its own scale and formula, so your score differs between them. Frequent applications in a short period can pull it down, which is one reason to avoid shotgunning applications across multiple lenders.
Cross-Collateralisation: When one lender holds two or more of your properties as security for the same loan or set of loans. It can simplify approval but ties the properties together, so selling one, refinancing away, or releasing equity all require the lender's agreement and a reassessment of the whole position. Many brokers structure loans to avoid it.
Debt Consolidation: Rolling personal loans, credit cards or other debts into your home loan to reduce the total monthly repayment. The repayment falls because the rate is lower and the term is longer, but stretching a five year debt across 30 years can cost more in total interest even at the lower rate. Lenders will also want the consolidated accounts closed, not just paid down.
Debt Service Ratio (DSR): A measure of how much of your income is consumed by debt repayments, expressed as a percentage. Lenders use DSR as part of their serviceability assessment to determine how much additional debt you can take on. There is no universal DSR threshold -- different lenders apply different limits.
Debt to Income Ratio (DTI): Total debt divided by gross annual income, giving a single figure for how leveraged a borrower is. Unlike serviceability, which asks whether you can afford repayments today, DTI asks how exposed you would be if rates rose. APRA requires lenders to report higher DTI lending and most lenders set their own internal ceiling, above which an application needs a strong reason to proceed. Thresholds are reviewed from time to time, so confirm the current position with your broker rather than relying on a figure you read.
Debtor Finance: Another name for receivables finance, funding drawn against the value of unpaid customer invoices. Also called invoice finance. See the Receivables Finance entry for how the advance, the fees and the two structures work.
Default: A missed or overdue payment serious enough to be listed on your credit report, generally where an amount is 60 days or more overdue and the required notices have been sent. Defaults typically stay on file for five years, and paying one off marks it as paid rather than removing it. Some specialist lenders will still lend with defaults recorded.
Deposit: The portion of the purchase price you contribute yourself, expressed as the balance left after the loan. A 20% deposit avoids Lenders Mortgage Insurance on most loans. Note that the deposit paid to the vendor at exchange, usually 5% or 10%, is a separate thing from the total contribution your lender expects at settlement.
Deposit Bond: A guarantee issued by an insurer that stands in place of a cash deposit at exchange, with the full purchase price then paid at settlement. It is useful where your cash is tied up in an unsold property or a term deposit, and is common in off the plan purchases with long settlement periods. It is a guarantee, not money: the deposit still has to be paid if you fail to settle.
Depreciation Schedule: A report prepared by a quantity surveyor setting out the deductions an investor can claim each year for the wear and tear on a building and its fixtures. It is a one off cost that typically produces deductions over many years. Rules on second hand plant and equipment changed in 2017, so eligibility depends on when and how the property was acquired. Confirm with your accountant.
Director: A person appointed to manage a company and legally responsible for its conduct. In lending, directors are the people a lender will ask to guarantee company borrowing personally, and their own credit files and income are assessed alongside the company's financials. Directors also carry duties under the Corporations Act that continue even where the company is the borrower.
Director Identification Number (Director ID): A unique identifier a company director must apply for and keep for life, introduced to make directors traceable across companies and to curb illegal phoenix activity. It is applied for through the Australian Business Registry Services and stays with the person even if they change companies or names. Lenders and their verification providers may check it when a company or trust with a corporate trustee is borrowing.
Discharge Fee: A fee charged by your existing lender to close out the loan and release the mortgage over your property, payable when you refinance or sell. It is separate from the government's mortgage discharge and registration fees, which are also payable. Factor both into any refinance calculation.
EBITDA: Earnings before interest, tax, depreciation and amortisation, a measure of a business's operating profitability stripped of financing and accounting effects. Commercial lenders use it to size borrowing capacity and to test debt serviceability against a multiple of earnings.
Employment Contract: The written agreement setting out your role, pay and employment basis, whether permanent full time, permanent part time, fixed term or casual. Lenders read it to confirm base income and how secure that income is. A signed contract can sometimes support a loan before the first payslip arrives, for example where you have accepted a new role and have not yet started.
Employment Verification: The check a lender runs directly with your employer, usually by phone or a written confirmation to payroll or HR, to confirm you are employed, in what role and on what income. It is normally done late in the process, close to formal approval. Where an employer is slow to respond it can hold up an approval, so it is worth telling your payroll contact to expect the call.
End Debt: The loan balance remaining after your existing property sells and the proceeds are applied to a bridging loan. This is the debt you will actually live with, and lenders assess your ability to service it on normal terms. A sale price below expectations leaves a larger end debt than planned.
Equipment Finance: Asset finance applied to plant, machinery, vehicles and business equipment, structured so the equipment itself secures the loan rather than your property. It preserves working capital and property equity for other uses. Lenders assess the asset as well as the borrower, so age, type and resale value all affect the terms.
Equity: The share of a property you actually own, calculated as its current market value less what you still owe. Usable equity is smaller than total equity, because most lenders will only let you borrow against up to 80% of the value without triggering LMI.
Establishment Fee: The lender's upfront charge for setting up a new loan, sometimes called an application or loan approval fee. It may be waived as part of a package or a promotional offer, and it is one of the inputs that pushes the comparison rate above the headline interest rate.
Exit Strategy: The plan for how a loan will be repaid where the term runs past the point of expected retirement, or where the loan is short term by design. Lenders assessing older borrowers are required to consider how repayments will be met once employment income stops, and will want that plan documented, whether it is downsizing, superannuation, sale of an asset or ongoing income. It also applies to bridging and short term facilities, where the exit is usually the sale of a property.
Extra Repayments: Payments above the scheduled minimum, which reduce the principal and therefore the interest charged for the rest of the loan. On a variable loan they are usually unlimited and recoverable through redraw. On a fixed loan they are typically capped, with break costs or fees where the cap is exceeded, so check the limit before making a lump sum payment.
Factoring: The form of receivables finance where the financier buys the invoices and takes over collecting from your customers directly, so the arrangement is visible to them. The alternative, invoice discounting, is confidential and leaves collections with you. Factoring can be recourse, where you carry the bad debt risk, or non-recourse, where the financier does.
Family Security Guarantee: The formal name most lenders give to a limited guarantee where a family member pledges part of their property equity to support a borrower's loan. It is capped at a specific amount, and once the borrower has built enough equity the guarantee can usually be released. Also marketed as a family pledge or guarantor loan.
Finance Lease: An arrangement where the financier owns the asset and leases it to the business for an agreed term, with the business responsible for maintenance and for a residual value at the end. Lease payments are generally deductible where the asset is used for business, and GST usually applies to the payments rather than the purchase price. Confirm the tax treatment with your accountant.
Financial Hardship: A situation where you cannot meet loan repayments because of circumstances such as job loss, illness, relationship breakdown or a drop in business income. Australian credit law gives you the right to ask your lender to vary the contract, and lenders must consider the request and respond in writing. Arrangements can include a repayment pause, reduced repayments or an extended term. Asking early, before arrears build, gives you the widest set of options.
Financial Statements: The set of accounts prepared for a business, typically the profit and loss statement, the balance sheet and the notes to the accounts. Lenders assessing self-employed or business borrowing usually want the two most recent years, prepared or signed off by an accountant, alongside the matching tax returns. They are the main evidence base for how a business actually performs, as opposed to what its bank balance shows this week.
FIRB Approval: Foreign Investment Review Board approval, required before most non-residents and temporary residents can buy Australian residential property. Application fees are substantial and states add foreign buyer duty surcharges on top. Rules and any temporary restrictions on foreign purchases of established dwellings change, so verify the current position before committing.
First Home Buyer: Someone purchasing their first residential property, who may be eligible for concessions including stamp duty relief, first home owner grants and places under the Home Guarantee Scheme. Eligibility rules, price caps and grant amounts are set state by state and change regularly, and prior property ownership by either applicant usually disqualifies both. Check current eligibility with your state revenue office rather than relying on general figures.
Fixed Rate: An interest rate set for a defined period -- typically one to five years -- that does not change regardless of movements in the cash rate. Fixed rate loans provide certainty over repayment amounts but typically restrict extra repayments and may not include offset accounts.
Full Doc Loan: A standard loan assessed on complete income evidence, meaning payslips and an ATO income statement for PAYG borrowers, or two years of tax returns, notices of assessment and financials for self-employed borrowers. It is the mainstream path and generally carries the sharpest rates and widest lender choice. Low doc and alt doc exist for borrowers who cannot yet meet the full doc evidence standard.
General Security Agreement (GSA): A security document giving a lender an interest over all of a business's present and future assets, registered on the PPSR. It is standard on many business loans and overdrafts. Because it captures everything, an existing GSA can block or complicate later borrowing from a different lender.
Genuine Savings: Funds you have accumulated yourself and held for a period, typically three months, which many lenders require when your LVR is above 90%. Money you saved in a bank account or held as equity usually counts. A gift, an inheritance or a first home owner grant often does not, though some lenders accept rent paid on time as an alternative.
Gifted Deposit: Deposit funds given by a family member, most often parents, with no expectation of repayment. Lenders normally require a signed gift letter confirming it is not a loan, and some still want a portion of genuine savings alongside it. If it is in fact repayable it is a debt, and declaring it correctly matters.
Government Benefit Income: Centrelink and similar payments such as the Age Pension, Disability Support Pension, Family Tax Benefit, Carer Payment and JobSeeker. Whether a lender will use these in servicing depends entirely on its own policy and on the payment type, and some will use certain payments only where they are supplementary to employment income. Where a payment is age limited, such as one tied to a child's age, lenders often reduce or exclude it.
Gross Income: Income before tax and before any deductions. Lenders assess servicing from gross income, then apply their own tax and living expense calculations, which is why the figure on your application is the pre tax one. For self-employed borrowers the equivalent starting point is net profit before tax, adjusted for add-backs.
GST (Goods and Services Tax): A 10 per cent tax on most goods and services sold in Australia. A business must register for GST once its turnover reaches the registration threshold, and then reports and pays it through business activity statements. In lending, GST registration date is a useful marker of how long a business has genuinely been trading, and BAS lodgements become an income evidence source for low doc applications.
Guarantor: Someone, usually a parent, who offers equity in their own property as additional security so the borrower can buy with a smaller deposit and often avoid LMI. The guarantee is normally limited to a set dollar amount rather than the whole loan. It is a real legal liability, and the guarantor should take independent legal advice before signing.
HEM (Household Expenditure Measure): A benchmark of typical household spending, based on ABS survey data and scaled by income, location and household size. Lenders use it as a floor: if your declared living expenses come in below the HEM figure for your household, the lender assesses you on the HEM figure instead.
Hire Purchase: A structure where the financier buys the asset and hires it to the business, with ownership transferring automatically once the final instalment is paid. It sits between a lease and a chattel mortgage. Chattel mortgage has largely displaced it in Australia since the 2012 GST changes, though it is still offered.
Home Guarantee Scheme: A federal government program administered by Housing Australia under which the government guarantees part of an eligible buyer's loan, allowing a purchase with a small deposit and no Lenders Mortgage Insurance. The scheme was expanded in 2025: income caps and the annual limit on places were removed, while property price caps still apply and vary by location. Price caps and eligibility are reviewed periodically, so check the current figures at housingaustralia.gov.au.
Home Loan: A loan used to buy or refinance residential property, secured by a mortgage over that property. It is regulated consumer credit where the purpose is personal, which brings responsible lending obligations and access to hardship rights and external dispute resolution. Loans for investment or business purposes are structured and regulated differently, even where the security is a house.
Income Shading: The practice of using only part of a variable income in a servicing assessment, for example 80 per cent of overtime or 75 per cent of rent. It exists because variable income is not guaranteed to continue at the same level. Shading percentages differ between lenders, which is a common reason the same borrower gets very different borrowing capacity figures from two lenders.
Income Verification: The evidence a lender requires to confirm what you earn before it will lend. For PAYG borrowers this is usually recent payslips plus an ATO income statement or bank statements showing the salary credits. For self-employed borrowers it is typically two years of tax returns and notices of assessment, or business financials. Verification is a legal obligation on the lender under responsible lending rules, not a formality.
Interest Only (IO): A repayment structure where your repayments cover only the interest for a set period, commonly one to five years, so the loan balance does not reduce. Repayments are lower during the IO period but higher afterwards, because the full principal must then be repaid over a shorter remaining term. Lenders usually charge a higher rate for interest only and apply tighter serviceability tests.
Interest Rate: The percentage the lender charges you each year for borrowing the money, applied to your outstanding balance. It is the headline number on a loan, but not the full cost, because fees are excluded. Use the comparison rate to weigh two loans against each other.
Introductory Rate: A discounted rate offered for an initial period, often one to two years, after which the loan moves to the lender's ongoing rate. Sometimes called a honeymoon rate. The number that matters is what you pay after it ends, so compare the revert rate and the comparison rate rather than the headline.
Investment Property: A property bought to generate rental income, capital growth or both, rather than to live in. Lending policy differs from owner occupied: rates are usually higher, LVR limits can be tighter, and lenders count only a portion of the rental income, commonly around 80%, when assessing serviceability.
Invoice Finance: Another name for receivables finance, where a business draws cash against invoices it has issued but not yet been paid for. Also called debtor finance. See the Receivables Finance entry for the detail.
Joint Application: A loan applied for by two or more borrowers, whose incomes, expenses, debts and credit files are all assessed together. All borrowers are jointly and severally liable, meaning each is responsible for the entire debt, not just their share, regardless of how the property is owned. That distinction matters most when a relationship or a business partnership ends.
Joint Tenants: A form of co-ownership where owners hold the whole property together in equal shares, and on the death of one owner their interest passes automatically to the survivors rather than through the will. It is the usual arrangement for couples. It can be severed and converted to tenants in common, which is often one of the first steps taken on separation.
Land Tax: An annual state or territory tax on the unimproved value of land you own above a threshold, generally excluding your principal place of residence. Thresholds, rates and surcharges for foreign owners differ in every state and change regularly, and holdings are aggregated within a state. Check your own state revenue office for current figures.
Lender: The institution providing the loan and holding the mortgage, whether a major bank, a customer owned bank, a non bank lender or a specialist funder. Each sets its own credit policy, pricing and appetite, and none of them is the best choice for every borrower. The lender is who you owe, which is distinct from the broker who arranged the loan.
Lender Panel: The set of lenders a particular broker is accredited to submit to. Panels vary widely, from a handful of majors to fifty or more lenders including non-banks and specialists. A term or product not on the panel simply cannot be offered to you, which is why panel breadth is a fair question to ask any broker.
Letter of Credit: A bank's written undertaking to pay a supplier once specified shipping and compliance documents are presented, widely used in international trade. It gives the exporter confidence they will be paid and the importer confidence that payment only releases against correct documentation. The bank deals in documents, not goods, so discrepancies in paperwork can hold up payment.
Line of Credit: A revolving facility with an approved limit that you draw on as needed and repay at will, paying interest only on the balance actually used. It suits irregular or unpredictable funding needs. The flexibility invites overuse, since there is no scheduled principal reduction forcing the balance down.
Living Expenses: Your declared ongoing household spending, broken into categories such as groceries, utilities, transport, insurance and childcare. Lenders verify the declaration against your bank statements and will use the higher of what you declare and their own benchmark. Understating expenses does not increase your borrowing capacity, it just delays the application.
LMI (Lenders Mortgage Insurance): Insurance that protects the lender if a borrower defaults and the property sale doesn't cover the outstanding loan amount. LMI is typically required when a borrower's LVR exceeds 80%. The cost can amount to tens of thousands of dollars and can sometimes be avoided through a guarantor arrangement.
Loan Fees: The charges attached to a loan beyond interest, which can include application or establishment fees, valuation fees, monthly or annual account fees, offset or package fees, redraw fees, and discharge fees at the end. Fees are what separate the interest rate from the comparison rate, and on a small loan they can matter more than a rate difference.
Loan Increase (Top Up): Borrowing more against a property you already own by increasing your existing loan rather than refinancing to a new lender. It requires a fresh servicing assessment and usually a valuation, and the lender will ask what the funds are for. It is often simpler and cheaper than a full refinance where your current rate is competitive.
Loan Term: The period over which a loan is scheduled to be repaid, most commonly 30 years for a home loan. A longer term lowers the repayment and raises total interest paid, a shorter term does the reverse. Resetting to a fresh 30 year term every time you refinance is one of the quietest ways a mortgage grows more expensive over a lifetime.
Low Doc Asset Finance: Equipment or vehicle finance approved without full financial statements, typically available to established businesses with a clean credit file and an ABN and GST registration held for a minimum period. Loan sizes are capped and the asset usually needs to be a standard, readily resaleable type.
Low Doc Loan: A home loan for borrowers who cannot provide standard two years of tax returns -- typically self-employed people. Instead, lenders may accept Business Activity Statements, business bank statements, or a signed income declaration. Low doc loans usually come with higher interest rates.
Loyalty Tax: The gap between what a lender charges its existing customers and the sharper rate it advertises to win new ones. It builds up quietly through revert rates and rate rises that are not matched by discounts. Reviewing your rate annually and asking for repricing is the simplest way to close it, without the cost of refinancing.
LRBA (Limited Recourse Borrowing Arrangement): The structure used when a Self-Managed Super Fund borrows to purchase an asset. Under an LRBA, the asset is held in a separate bare trust during the loan period. The lender's recourse in the event of default is limited to the asset -- they cannot claim the other assets of the SMSF.
LVR (Loan-to-Value Ratio): The ratio of your loan amount to the value of the property, expressed as a percentage. An LVR of 80% means you're borrowing 80% of the property's value. Higher LVR loans may trigger Lenders Mortgage Insurance (LMI) or attract a higher interest rate.
Mortgage: The legal security a lender takes over a property so that if the loan is not repaid, the lender can take possession and sell it. Strictly the mortgage is the security, not the loan itself, though in everyday use the word covers both. It is registered on the property's title, which is why a discharge is required before the property can be sold or refinanced.
Mortgage Broker: A credit adviser who assesses a borrower's position, compares loans across a panel of lenders and manages the application through to settlement. Brokers in Australia are subject to a best interests duty, which requires them to act in the client's interests, and must hold an Australian Credit Licence or be an authorised credit representative under one. They are usually paid by the lender, and that commission must be disclosed.
Mortgage Registration Fee: A government charge for recording or removing a mortgage on the property title at the state land registry. It is a fixed dollar amount rather than a percentage, set by each state and territory, and applies on both registration and discharge.
Mortgagee: The party who holds the mortgage, meaning the lender. A mortgagee in possession sale, sometimes shortened to a mortgagee sale, is a sale by the lender after a borrower has defaulted. The mortgagee's interest is registered on the title and removed on discharge.
Mortgagor: The party who grants the mortgage, meaning the property owner who borrows. It is the easy one to mix up: the mortgagor is you, not the bank. Where a property is owned by more than one person, all owners are mortgagors even if only one is on the loan.
NCCP Act: The National Consumer Credit Protection Act 2009, the Commonwealth law governing consumer lending in Australia. It requires anyone engaging in credit activities to be licensed or authorised, imposes responsible lending obligations, and sets out the disclosure documents you must receive. It applies to consumer credit, so most pure business lending sits outside it.
Negative Gearing: When the costs of owning an investment property exceed the rental income it generates, resulting in a net loss. In Australia, this loss can be offset against other income, reducing your overall tax liability. A common strategy among property investors who expect capital growth to outweigh short-term losses.
Net Income: Income after tax, the amount that actually lands in your account. Lenders work from gross income rather than net, but your net income is what your budget and your real repayment comfort are built on. It is worth checking a repayment against your net pay, not just against a lender's servicing outcome.
Non-Bank Lender: A lender that funds loans without holding a banking licence, raising money from wholesale markets and securitisation rather than deposits. Non-banks are still regulated under the NCCP Act for consumer lending, but sit outside APRA's prudential rules, which lets them apply different serviceability policy. They are often the answer where a bank's policy, rather than the borrower's affordability, is the obstacle.
Notice of Assessment (NOA): The statement the ATO issues after processing a tax return, confirming assessed taxable income and any tax owed or refunded. For self-employed borrowers it is the single most important income document, because it is the ATO confirming the figure rather than the borrower claiming it. Most lenders want the two most recent notices, and will not accept a lodged return without the matching notice.
Novated Lease: A three way arrangement between an employee, their employer and a financier, where the employer takes on the lease payments and deducts them from the employee's salary, usually partly pre-tax. It is a salary packaging arrangement rather than business finance. If you change jobs the obligation generally reverts to you, so check the exit terms before signing.
Off the Plan: Buying a property that has not been built yet, based on plans and specifications, with settlement due once construction is complete and the title is registered. The gap between exchange and settlement can be years, during which your circumstances, the lender's policy and the property's value can all change. Finance cannot be formally approved until close to completion, so the valuation risk sits with the buyer.
Offset Account: A transaction account linked to your mortgage where the balance is offset against your loan principal when calculating interest. If you have a $500,000 loan and $50,000 in your offset account, you only pay interest on $450,000.
Operating Lease: A rental arrangement where the financier retains ownership and the residual risk, and the business simply returns the asset at the end of the term with no obligation to buy it. It suits equipment that dates quickly, such as IT hardware and some vehicles. It costs more over the term than owning, in exchange for shedding the resale risk.
Overtime Income: Pay for hours worked beyond your ordinary hours. Lenders commonly use somewhere between 50 and 100 per cent of overtime depending on the lender and the industry, and usually want three to twelve months of history to show it is consistent. Essential services roles such as nursing, policing and emergency services often get more generous treatment.
Owner Occupier: A borrower who lives in the property being financed, as distinct from an investor. Owner occupier loans generally carry lower rates than investment loans because regulators and lenders treat them as lower risk. Moving out and renting the property changes its status, and you are required to tell your lender rather than leave the loan classified incorrectly.
Package Loan: A bundled home loan product that trades an annual fee for a discounted variable rate, a fee free offset account and waived fees on credit cards or additional splits. Whether it is worth it comes down to arithmetic: the rate discount has to exceed the annual fee across the loan size you actually hold. On smaller balances a basic loan with no annual fee is often cheaper.
Parental Leave Income: Income while on paid or unpaid parental leave, which may include employer paid leave, government paid parental leave, or neither. Many lenders will assess you on your normal return to work salary rather than your reduced leave income, provided you supply a letter from your employer confirming your return date, role and salary. Policies vary widely between lenders, so this is worth checking before an application rather than after.
Partnership: A structure where two or more people or entities run a business together and share its income. The partnership lodges its own return but does not pay tax itself, with each partner declaring their share in their own return. Lenders assess your partnership share, and in a general partnership each partner can be liable for the debts of the whole business.
PAYG (Pay As You Go): The system under which an employer withholds tax from your wage and sends it to the ATO on your behalf. In lending, 'PAYG borrower' is shorthand for someone on a salary or wage, as opposed to self-employed. PAYG applicants are usually the simplest to assess because income is evidenced by payslips and an ATO income statement rather than business financials.
Payslip: The record your employer issues each pay cycle showing gross pay, tax withheld, net pay and year to date totals. Lenders generally want the two most recent payslips, dated within about 30 to 60 days, and read them for base income, overtime, bonuses, allowances and employer name. Year to date figures are used to check that your stated income matches what you are actually being paid.
Peak Debt: In a bridging loan, the total owing at the highest point: your existing loan, plus the new purchase price and costs, less any deposit paid. Interest accrues on this full amount until the old property sells. Lenders test both peak debt and end debt before approving.
Personal Guarantee: A promise by a director or owner to repay the business's debt personally if the business cannot. It effectively removes the protection of the company structure for that debt, and can put the family home at risk if it is supported by property security. Most business lenders require one, and it should be reviewed by a lawyer before signing.
Policy Exception: Approval of an application that sits outside a lender's normal credit policy, granted by a credit manager who accepts the risk based on offsetting strengths. Common examples include probation employment, a slightly higher LVR, or a short ABN history alongside a large deposit. Exceptions are discretionary, need a documented case, and are never something to count on before it is granted.
Loan Portability: A feature that lets you move an existing loan to a new property when you sell and buy, keeping the same loan, rate and account rather than discharging and reapplying. It can avoid a new application, fresh LMI and break costs on a fixed rate. It generally requires the two settlements to happen on the same day.
Positive Gearing: When an investment property earns more in rent than it costs to hold, producing a net income. The surplus is assessable income and adds to your tax bill, unlike a negatively geared property which reduces it. Positive cash flow generally makes it easier to service further borrowing.
PPSR (Personal Property Securities Register): The national online register of security interests in personal property, meaning assets other than land, such as vehicles, equipment, inventory and receivables. A lender registers on the PPSR to protect its claim to an asset. Buyers can and should search it before purchasing a used vehicle or item of equipment, since an unregistered check can leave you buying something a financier can repossess.
Pre-Approval: An indication from a lender of how much it is willing to lend you, given before you have found a property. It is subject to conditions, most importantly a satisfactory valuation of whatever you end up buying, and it usually expires after three to six months. Treat it as a strong signal, not a guarantee, and check whether it was credit assessed or merely system generated.
Principal and Interest (P&I): A repayment structure where each repayment covers both a portion of the loan principal and the interest charged. P&I repayments mean the loan balance reduces with each payment. Most owner-occupied home loans are P&I. Contrast with interest-only loans, where repayments cover only the interest.
Private Lending: Funding from private individuals, funds or non-institutional sources, secured against property and priced well above bank rates. It is used where speed matters more than cost or where no regulated lender will act, typically on short terms of a few months to a couple of years. Always confirm the total cost including fees, and have a documented exit before drawing down.
Private Treaty: The standard sale method where a property is listed at an asking price and buyers negotiate with the seller through the agent. Unlike an auction it allows conditions such as subject to finance, and in most states a cooling off period applies. It gives a buyer more room to do due diligence after agreeing a price.
Probation Period: The initial period in a new job, commonly three to six months, during which employment can be ended with short notice. Some lenders decline applicants on probation, others accept them where the role is in the same industry as the previous job or the employment is permanent. Being on probation is not automatically a barrier, but it narrows which lenders will consider the application.
Profit and Loss Statement: A financial report showing income, expenses and the resulting profit or loss over a period, usually a financial year. Lenders read it to understand where revenue comes from, how stable margins are, and which expenses are genuine business costs rather than owner benefits that can be added back. An interim profit and loss for the current year is often requested where the last full year is out of date.
Progress Payments: The staged drawdowns on a construction loan, typically released at slab, frame, lock up, fit out and practical completion. Each stage requires the builder's invoice and usually a lender inspection before funds are released. Delays at any stage extend the interest only period and push out the start of principal repayments.
Property Settlement (Family Law): The division of assets and liabilities between separating partners, whether married or de facto, covering property, superannuation and debts. It can be agreed informally, formalised by consent orders, or decided by a court. Until a mortgage is formally refinanced or discharged, both parties usually remain liable to the lender regardless of what the settlement says between them, which is the point where finance advice matters as much as legal advice.
Rate Lock: An option to fix the quoted fixed rate for a set period, commonly 60 to 90 days, so a rate rise between application and settlement does not affect you. Lenders usually charge a fee for it, either a flat amount or a percentage of the loan. It is worth weighing where fixed rates are moving upward and settlement is some weeks away, and pointless where they are steady or falling.
Redraw Facility: A feature that lets you pull back extra repayments you have already made above the required minimum. It reduces interest the same way an offset account does, but the money sits inside the loan rather than in a separate account, and lenders can restrict or withdraw access to it. Redraw on an investment loan can also complicate the deductibility of interest, so get tax advice before using it.
Refinance: Replacing an existing loan with a new one, either with your current lender or a different one, usually to get a better rate, restructure the debt, consolidate other borrowings, or release equity. Weigh the saving against discharge fees, registration fees, any break costs on a fixed rate, and a fresh LMI premium if your LVR is above 80%.
Rental Income: Rent received from an investment property. Lenders typically use 70 to 80 per cent of the gross rent in servicing, the discount covering vacancy, management fees, rates and maintenance. Existing rent is evidenced by a lease or agent statement, while proposed rent on a purchase is supported by a rental appraisal or the valuer's estimate.
Rentvesting: Renting where you want to live while owning an investment property somewhere more affordable. It lets you enter the market without changing your lifestyle or location, and the loan is assessed as investment lending with rental income counted. The trade-offs are losing the main residence capital gains tax exemption on the investment and paying rent that builds no equity, so it is worth modelling rather than assuming.
Repayment Frequency: How often repayments are made, usually weekly, fortnightly or monthly. Paying fortnightly at half the monthly amount results in 26 payments a year, the equivalent of 13 monthly payments rather than 12, which shortens the loan. Some lenders calculate a true fortnightly figure instead, which removes that effect, so check how yours is set up.
Responsible Lending Obligations: The duty under the NCCP Act to make reasonable inquiries into your financial situation, requirements and objectives, verify what you have told them, and only proceed if the credit is not unsuitable for you. This is why lenders ask for payslips, statements and a breakdown of living expenses rather than taking your word for it.
Revert Rate: The interest rate your loan automatically switches to when a fixed rate period or an introductory discount ends. It is usually the lender's standard variable rate, which is often well above what you were paying and above what is available to new customers. Diarise the end date and review the loan before it hits.
Second Mortgage: A further loan secured against a property that already has a mortgage on it, ranking behind the first lender for repayment if the property is sold. The first mortgagee generally must consent. The subordinate position means higher rates and shorter terms, and it is most often seen in commercial and private lending.
Secured Loan: A loan backed by an asset the lender can take and sell if you do not repay, such as property, a vehicle or equipment. Because the lender's risk is lower, secured loans carry lower rates, larger limits and longer terms than unsecured ones. The trade-off is that the asset is genuinely at risk.
Security Property: The property a lender takes a mortgage over as security for a loan. It is usually the property being purchased, but can be another property you own, which is how equity releases and guarantor structures work. The lender's view of a security's acceptability, based on type, size, location and condition, can decide an application on its own.
Self-Employed Borrower: Someone whose income comes from their own business rather than PAYG wages, whether as a sole trader, through a company, or through a trust. Full doc lenders typically want two years of tax returns and financials. Where those are not available or do not reflect current trading, alt doc and low doc options use BAS, bank statements or an accountant's declaration instead.
Serviceability: A lender's assessment of whether you can afford to repay a loan based on your income and existing debts. Lenders apply a serviceability buffer -- typically 3% above the current interest rate -- to test whether you could still meet repayments if rates rose.
Serviceability Buffer: The margin lenders add on top of the actual interest rate when testing affordability, to check you could still cope if rates rose. APRA has required regulated lenders to apply a buffer of 3 percentage points since 2021 and has maintained that setting through its periodic reviews. It applies to APRA regulated lenders, so some non-banks assess differently.
Servicing Calculator: The lender's own tool that takes income, expenses, debts and the proposed loan and returns whether the loan services and by how much. Each lender's calculator applies its own assessment rate, income shading and expense benchmarks, which is why brokers run several before recommending a lender. The output is an indication for the credit assessor, not an approval.
Settlement: The day the transaction completes: the lender advances the funds, the balance of the purchase price is paid to the seller, title transfers, and the mortgage is registered. In Australia most settlements now happen electronically through PEXA. Your first repayment is generally due about a month later.
Simultaneous Settlement: Settling the sale of your existing property and the purchase of your new one on the same day, so the proceeds of one fund the other. It avoids the cost of bridging finance but leaves no margin for error, since a delay on either side stalls both. Bridging finance is the usual fallback when the dates cannot be aligned.
SME (Small and Medium Enterprise): A small or medium sized business. There is no single legal definition in Australia, and the threshold shifts with who is measuring: the ATO commonly treats a small business as one under 10 million dollars in aggregated turnover, the Fair Work system defines a small business by headcount, and individual lenders set their own limits again. In lending, SME usually signals a business borrowing under a commercial or business finance policy rather than a large corporate one.
SMSF (Self-Managed Super Fund): A superannuation fund you run yourself, with up to six members who are generally all trustees, regulated by the ATO rather than APRA. An SMSF can borrow to buy an investment asset, but only through a limited recourse borrowing arrangement with the asset held in a separate bare trust. Trustees carry legal responsibility for compliance, so specialist advice is essential.
SMSF Loan: A loan used by a Self-Managed Superannuation Fund to purchase an investment asset, structured as a Limited Recourse Borrowing Arrangement (LRBA). The lender's recourse in the event of default is limited to the asset purchased, not the other assets of the fund.
Sole Trader: The simplest business structure, where you trade in your own name under your own ABN and there is no legal separation between you and the business. Business income is declared in your personal tax return, so lenders assess it from your individual return and notice of assessment. You are personally liable for business debts, which is why business borrowing as a sole trader sits directly against you.
Specialist Lender: A lender that deliberately writes loans mainstream lenders decline, such as borrowers with defaults, discharged bankruptcies, irregular income or unusual security. Rates and fees are higher to price the added risk. These are usually staging loans, held for a year or two while the credit file repairs, then refinanced back to a mainstream lender.
Split Loan: A loan divided into two or more portions, most commonly one fixed and one variable, so you get some repayment certainty while keeping flexibility on the rest. The split does not have to be even. Offset accounts generally only work against the variable portion.
Spousal Transfer: Transferring a share of property between partners, most commonly when one party takes over the family home after separation. Every state and territory offers some form of duty relief where the transfer is between spouses or de facto partners, but the conditions differ and usually depend on the transfer being made under consent orders, a court order or a binding financial agreement, and often on the property being the principal residence. Confirm the current requirements with your state revenue office and your lawyer before committing, and expect to refinance the loan into one name as part of it.
Stamp Duty: The state or territory tax on property transfers, also called transfer duty. It is usually the largest upfront cost after the deposit and is calculated on a sliding scale based on the purchase price. Rates, thresholds and first home buyer concessions differ in every state and change regularly, so check your own state revenue office for current figures.
Strata: The ownership structure for apartments, townhouses and some commercial premises, where you own your lot and share ownership of common property with the other owners. The owners corporation, called a body corporate in some states, manages common property and levies quarterly fees. Lenders look at strata reports, levy levels, the sinking fund and any special levies, and some restrict lending on very small or very large complexes.
Surplus Income: What is left in a lender's servicing calculation after assessed repayments, living expenses, tax and existing commitments are deducted from assessed income. A positive surplus means the loan services, a negative one means it does not. Because lenders use a buffered assessment rate and a minimum living expense benchmark, the surplus figure is deliberately conservative rather than a picture of your real monthly spare cash.
Tax Return: The annual return lodged with the ATO declaring income, deductions and tax payable. Lenders assessing self-employed income usually want two years of personal returns, and where you trade through a company or trust, the entity returns as well. Returns are read together with the notice of assessment, because the notice is what the ATO has actually assessed.
Tenants in Common: A form of co-ownership where each owner holds a defined share, which can be unequal, and can leave that share to whoever they choose in their will. It suits blended families, friends buying together and parties contributing different amounts. Note that the ownership split does not change joint liability on the loan: each borrower can still be pursued for the whole debt.
Trail Commission: An ongoing annual payment from the lender to the broker for as long as the loan stays open, calculated on the outstanding balance. It is intended to fund continuing service, such as reviewing your rate and helping with variations. Like upfront commission, it is paid by the lender and disclosed in your credit guide.
Trust: An arrangement where a trustee holds assets for the benefit of beneficiaries, commonly used for asset protection and to distribute income within a family or business group. Discretionary or family trusts are the most common in lending. Lenders need the trust deed, and will usually require the trustee to borrow in its capacity as trustee with guarantees from the beneficiaries who actually receive the income.
Trustee: The person or company that legally holds and controls the assets of a trust and enters contracts on its behalf, including loan contracts. A corporate trustee is a company set up solely for this role, which most lenders prefer because it keeps the trust's affairs separate and makes changes of control simpler. The trustee's duties are set by the trust deed and by law, not by the beneficiaries.
Turnover: Total sales or revenue a business generates before any expenses are taken out. It is not profit, and a business with high turnover can still be unprofitable, which is why lenders look past it to margin and net position. Turnover matters for GST registration, for many SME lending thresholds, and as the basis for cashflow style business lending.
Unconditional Approval: Full and final approval, with every condition satisfied and no outstanding requirements. This is the point at which the lender is committed to funding the loan, and the point most contracts require you to reach before finance clause expiry. Also called formal or full approval.
Unsecured Loan: A loan with no specific asset pledged as security, approved on the strength of cash flow and credit history instead. Approval is faster and no property is required, but limits are smaller, terms shorter and rates materially higher. Most unsecured business lenders still take a director's personal guarantee, so the borrowing is rarely risk free.
Upfront Commission: A one-off payment made by the lender to the broker's aggregator when a loan settles, usually calculated as a percentage of the amount drawn down, and often net of any offset balance. The borrower does not pay it directly. It must be disclosed to you in the credit guide and proposal documents.
Valuation: The lender's assessment of what a property is worth, used to calculate LVR. It can be a full inspection, a desktop valuation from sales data, or an automated estimate, depending on the loan size and risk. The valuation is done for the lender's benefit, not yours, and a figure below the contract price will reduce how much you can borrow.
Variable Rate: An interest rate that can move up or down over the life of the loan, usually in response to changes in the RBA cash rate or the lender's own funding costs. Variable loans typically allow unlimited extra repayments, offset accounts and redraw, and can be refinanced without break costs. The trade-off is that your repayment amount is not guaranteed from one month to the next.
Vendor: The seller of a property. Vendor terms such as a longer or shorter settlement, an early release of deposit, or a rent back arrangement are negotiable and can matter as much as price. Vendor finance, where the seller lends part of the price, is rare in residential sales and needs legal advice.
Working Capital: The money a business needs to fund day to day operations, technically current assets less current liabilities. A profitable business can still run out of working capital if customers pay slowly while wages, stock and rent fall due sooner. Most short term business finance exists to bridge that gap.
Chattel Mortgage: A way of financing a vehicle or piece of equipment where the business owns the asset from day one and the lender registers a security interest over it on the PPSR until the loan is repaid. Because the business is the owner, it can generally claim depreciation and the interest portion of repayments, and a business registered for GST on an accruals basis can usually claim the GST credit on the purchase price upfront. Structures often include a balloon or residual payment at the end of the term to lower monthly repayments.