Terms relating to the applicant

Terms you may read amd wonder what they mean.

  1. Mortgagor: The applicant for a mortgage – the person who pays the mortgage loan.
  2. Mortgagee: The lending institution the applicant accesses the loan from. Also known as “the lender”.
  3. Mortgage broker: The person who arranges the home loan process between the applicant and the lender. They spend time analysing the applicant’s situation and, using their experience and market knowledge, provide the appropriate lending solution.
  4. Pro-pack loan: A loan that has lots of 'bells and whistles' such as an attached offset account, a fee-free credit card, complimentary travel insurance and various discounts on a range of banking products, including your home loan - usually with a single annual package fee.
  5. Low doc/no doc loan: Loans that don’t require as much paperwork as regular loans. Designed for people who might have difficulty getting documentation together. These loans are popular with self-employed people, tradespeople or those with irregular patterns of income.
  6. Non-conforming loan: A loan that may be provided to applicants who have a poor credit status or limited information on their income.

Terms about the loan

Loans come in all sizes and shapes as do the terms used to describe them.

  1. Bridging loan: A ‘buy before you sell’ loan based on the equity you may have in your current property. An advantage is that you can buy or build your new home before you sell your existing home or avoid moving into a rental property and move directly into your new home.
  2. LVR (Loan-to-value ratio): Refers to the percentage of the loan compared to the home’s value. If a property is worth $600,000 and the loan is $480,000 then the LVR is 80%, as $480,000 is 80% of $600,000.
  3. Split loan: If the applicant is unsure about ‘locking in’ an interest rate, or electing to have a ‘variable’ rate, they can ‘split’ the loan to use both options.
  4. Pre-approved’ or ‘approval in principle’ loan: This is an indication from the lender that they are happy with the loan application; however, even though they would consider providing you with finance, it is not a final approval of a loan.
  5. Offset account: A savings account linked to your mortgage, it allows lower interest to be paid. For example, if your mortgage balance is $500,000 and you have $50,000 in your offset account, you only pay interest on $450,000.

Terms about things that might happen

Choosing the wrong loan can be inflexible, unnecessarily expensive and even inadequate for your needs. This is where our deep knowledge and expertise is invaluable.

  1. Portability: This allows flexibility where the loan can move over to another property; however, there are usually additional charges, including valuation fee, registration fee and lender’s fee.
  2. Redraw: Allows a borrower to access extra repayments they have already made on their mortgage, that are above their required minimum repayment.
  3. Break costs for a fixed rate: If you have a fixed-rate home loans and wish to switch into a variable or other loan there may be ‘break costs’ levied by the lender. This is an agreed charge for paying out your loan, or breaking the loan agreement, early. It is important to take account of any break costs associated with getting out of a fixed loan.
  4. Line of Credit: With this type of loan, you can access funds up to your approved limit at any time. A disadvantage is that the interest rate is usually higher than Standard Variable Rate and Low Rate Basic Loans.

Need to know more?

For more assistance with translating mortgage loan terminology for your clients, please contact us.

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