Mortgage brokers glossary

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

What is a comparison rate?: A comparison rate is a single percentage figure that combines the interest rate with loan fees and charges, allowing borrowers to compare the true cost of different mortgages on an equal basis.
What is a credit representative?: A credit representative is an individual registered with ASIC to provide credit assistance under the authority of a licensed credit provider, without needing to hold their own Australian Credit Licence.
What is a guarantor loan?: A guarantor loan is a home loan where a family member guarantees repayment by pledging their property equity or assets as security, allowing the borrower to reduce their deposit or avoid lenders mortgage insurance.
What is a lender's valuation?: A lender's valuation is an independent assessment of a property's value ordered by a bank or mortgage lender to determine the security available against a loan, which may differ from the purchase price or market value.
What is a lenders panel?: A lenders panel is the group of banks, credit unions, and other lenders a mortgage broker is accredited with and able to submit loan applications to.
What is a loan structure (facility)?: A loan facility structure refers to how a lender organizes a home loan into multiple components (splits), each with its own terms, interest rates, and sub-accounts that can work together through offset features to reduce interest paid.
What is a mortgage broker aggregator?: An aggregator is an intermediary that manages a portfolio of lender relationships and provides brokers with access to multiple loan programs, typically while holding credit representative authorisation.
What is a mortgage broker's commission (trail and upfront)?: Mortgage broker commissions consist of upfront payments (lump sum at loan settlement) and trail commissions (ongoing percentage of loan balance), paid by lenders rather than borrowers, and are disclosed under the broker's best interests duty.
What is a redraw facility?: A redraw facility allows borrowers to withdraw extra repayments they have made on a home loan, subject to lender restrictions and terms.
What is a split loan?: A split loan is a home loan divided into two or more portions, with some charged at a fixed interest rate and others at a variable rate, managed as a single facility.
What is an assessment rate (serviceability buffer)?: The assessment rate is a mandatory APRA buffer (typically 3%) added to the actual loan interest rate when lenders test whether a borrower can service a mortgage in adverse conditions. It reduces the maximum loan amount a borrower can access.
What is an offset account?: An offset account is a transaction account linked to a home loan where the balance you hold reduces the amount of interest calculated on your loan, dollar-for-dollar.
What is best interests duty (BID)?: Best interests duty (BID) is a legal obligation introduced in 2021 requiring Australian mortgage brokers to recommend loans and lenders that are genuinely suited to the client's needs and circumstances, rather than prioritizing commissions.
What is fixed vs variable rate?: Fixed-rate mortgages lock an interest rate for the entire loan term or a set period, while variable-rate mortgages allow the rate to change in line with market movements.
What is genuine savings?: Genuine savings are funds a borrower has held in their own bank account for a minimum of 3 months, demonstrated to prove financial capacity and commitment when applying for a mortgage with a deposit below 20%.
What is lenders mortgage insurance?: Lenders mortgage insurance is a one-off premium paid by borrowers when their loan-to-value ratio exceeds 80%, protecting the lender against default risk rather than the borrower.
What is loan to value ratio (LVR)?: LVR is the percentage of a property's value that a lender will loan, expressed as a ratio of the loan amount to the total purchase price or valuation.
What is pre-approval (conditional approval)?: Pre-approval is a conditional commitment from a lender indicating the loan amount they may be willing to advance, subject to final verification of your financial details and property valuation.
What is principal and interest vs interest only?: Principal and interest is a loan repayment method where borrowers pay both the borrowed amount and accrued interest, while interest-only loans require only interest payments during a set period, with the principal due later.
What is serviceability?: Serviceability is a lender's assessment of a borrower's ability to meet loan repayments based on their income, expenses, debts, and a buffer rate applied to interest rates.
What is settlement in property purchases?: Settlement is the final stage of a property purchase when the buyer transfers funds to the seller, the mortgage is registered, and legal ownership transfers to the buyer.
What is stamp duty concession?: Stamp duty concession is a reduction or exemption from transfer duty (stamp duty) granted by the WA government to first home buyers who meet eligibility criteria when purchasing a property.
What is the First Home Owner Grant?: The First Home Owner Grant (FHOG) is a state-funded financial grant offered by Western Australia to eligible first-time property buyers to help with the cost of purchasing or building a home.
What is unconditional approval?: Unconditional approval is a lender's formal final commitment to issue a home loan after the property valuation is complete and all conditions have been met, following on from conditional pre-approval.