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Mortgage jargon, translated

Lending is full of shorthand that nobody explains. Here is every term I find myself translating for clients, in plain English - two or three sentences each, no waffle. If a lender or broker uses a word that is not here, ask me and I will add it.

Alt doc: Short for alternative documentation. An alt doc loan lets self-employed borrowers verify income with documents like BAS, business bank statements or an accountant's letter instead of full tax returns. It can be considered when your latest financials are not ready yet or do not tell the whole story.
Assessment rate / buffer: Lenders do not test your repayments at the rate you will actually pay. They add a buffer on top and check you could still afford the loan if rates rose. This higher test rate is the assessment rate, and it is a big reason borrowing power differs from lender to lender.
Bridging loan: A short-term loan that covers the gap when you buy a new home before selling your current one. You carry both debts briefly, then the sale proceeds pay the bridge down. Timing and a realistic sale price matter, so it needs careful planning.
Cash out: Borrowing against the equity in your property and taking the difference as cash - for renovations, investment or other purposes. Lenders ask what the money is for and may want evidence, and each lender caps how much cash out it will consider.
Comparison rate: A figure that bundles a loan's interest rate and most standard fees into one number, so you can compare loans on more than the headline rate. It is calculated on a set example loan, so your own loan may work out differently. Useful for comparing options - not a promise of what you will pay.
Construction loan / progress payments: A loan for building a home, drawn down in stages rather than in one lump sum. The lender releases progress payments to the builder as each stage finishes - slab, frame, lock-up and so on. You generally pay interest only on the amount drawn so far.
Credit file / default: Your credit file is the record credit bureaus keep of your loans, repayment history and credit applications. A default is an overdue debt listed on that file, and it stays there for years. A default does not automatically end your home-loan plans - some lenders can consider the story behind it.
Debt consolidation: Rolling several debts - credit cards, personal loans, car loans - into your home loan so you make one repayment. It can ease monthly pressure, but stretching short-term debt over a long loan term can cost more overall unless you keep paying it down quickly.
Equity: The difference between what your property is worth and what you still owe on it. Equity grows as you repay the loan or as the property rises in value. It can sometimes be used as the deposit for a next purchase, or accessed through refinancing.
Fixed vs variable: A fixed rate locks your repayments in for a set period, while a variable rate can move up or down over time. Fixed gives certainty but less flexibility - break costs can apply if you exit early. Many borrowers split a loan into part fixed, part variable.
Full doc: A standard loan application where income is verified with full documentation - payslips, tax returns and notices of assessment. It is the default pathway and usually opens up the widest choice of lenders.
Genuine savings: Money you have saved and held yourself over time, usually shown across at least three months of statements. Many lenders want to see genuine savings on low-deposit loans, rather than a deposit that arrived as a single lump sum. A solid rent history can sometimes count towards it.
Guarantor: A person, usually a parent, who offers their own property as extra security for your loan. It can help you buy with a smaller deposit and may avoid LMI. The guarantor takes on real risk, so lenders require them to get legal and financial advice first.
HEM / living expenses: HEM stands for Household Expenditure Measure - a benchmark lenders use to estimate a household's basic living costs. Lenders compare your declared expenses against HEM and generally use the higher figure when testing what you can afford. Tidying up your spending before applying can genuinely help.
LMI: Lenders Mortgage Insurance. A one-off premium that can apply when you borrow with a smaller deposit, above a threshold set by the lender. It protects the lender, not you - but it can also get you into a home years earlier than saving the full deposit would.
LVR: Loan-to-value ratio - your loan amount as a percentage of the property's value. A $450,000 loan on a $600,000 property is a 75% LVR. Lower LVRs generally open up more lenders and sharper pricing tiers, while higher LVRs may trigger LMI.
Offset account: An everyday bank account linked to your home loan. The balance sitting in it reduces the loan amount that interest is calculated on. Your money keeps working against the loan while staying available to spend.
Pre-approval: A lender's conditional yes before you have found a property. It tells you roughly what you could spend and makes your offers more credible. It is not a guarantee - the property itself, final checks and any change in your position still matter.
Redraw: A facility that lets you take back extra repayments you have made ahead of schedule on your loan. The effect is similar to an offset account, but the money sits inside the loan and access rules vary between lenders.
Refinance: Replacing your current home loan with a new one - with your existing lender or a different one. People refinance for a sharper deal, a better structure, to access equity or to consolidate debt. It is worth reviewing every couple of years, because loyalty is rarely rewarded.
Revert rate: The rate your loan rolls onto when a fixed period or introductory deal ends. It is often less competitive than what new customers are offered, which is how loans quietly drift expensive when left alone. Put the end date of any fixed period in your diary.
Serviceability: A lender's test of whether you can afford the loan - your income measured against your expenses, existing debts and the new repayments at the assessment rate. Every lender calculates it differently. That is why one lender may decline a loan that another can consider.
Settlement: The day the property legally changes hands. The lender advances the loan, the seller is paid and you get the keys. Your conveyancer or solicitor coordinates it with the lender - my job is making sure the loan side is ready on time.
SMSF loan: A loan taken by a self-managed super fund to buy an investment property inside super, under a strict structure called a limited recourse borrowing arrangement. Fewer lenders offer them and the rules are tight, so the structure and professional advice come first.

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General information only, not credit advice. Your circumstances, lender criteria and responsible lending requirements apply. John Carson-Zangor is a credit representative (537545) of QED Credit Services Pty Ltd, Australian Credit Licence 387856.