Home loan glossary

The assessment rate, also called the serviceability buffer, is a higher interest rate that lenders use to test whether you can still afford repayments if interest rates increase. Lenders add a margin to your actual interest rate, making the loan harder to qualify for than your repayments would suggest. Each lender sets its own buffer, so your borrowing capacity may vary from bank to bank. See serviceability and how lenders decide what you can borrow.

A comparison rate combines a loan’s interest rate and standard fees into a single percentage, making it easier to compare the true cost of different loans beyond the advertised rate. In Australia, it is calculated using a standard benchmark loan, so while it's a helpful guide, your actual costs may vary depending on your specific loan amount and term. See fixed vs variable.

Your deposit is the cash you put towards a property purchase, with the loan covering the rest. A larger deposit lowers your LVR (loan-to-value ratio), which can widen your lender options and help you avoid LMI (lenders mortgage insurance). Budget for upfront costs on top of the deposit, like stamp duty; our stamp duty and purchase costs calculator gives an estimate. See how big a deposit you need.

Equity is the portion of your property you truly own: its current value minus what you still owe on the loan. Your equity grows as you pay down the loan or as the property rises in value, and you can sometimes use it as part of a deposit on another property or when refinancing.

A fixed rate keeps your interest rate, and your repayments, the same for a set term, usually one to five years. It gives certainty if rates rise but can charge break costs if you exit early, and often has fewer features than a variable rate. Xandii's indicative figures are based on variable rates for now; a broker can talk through fixed options. See fixed vs variable.

A guarantor is usually a family member who uses the equity in their own property as additional security for your loan. It can let you borrow with a smaller deposit and may help you avoid LMI (lenders mortgage insurance), however, the guarantor is liable if you cannot repay. See what is a guarantor loan.

HEM (the Household Expenditure Measure) is a benchmark for typical household living expenses that lenders use as a base amount. If the expenses you declare are below the benchmark for a household like yours, most lenders assess you on the benchmark instead, which can lower the amount they will lend. The home loan comparison tool applies each lender's own HEM. See what is HEM.

LMI (lenders mortgage insurance) is a one-off insurance most lenders require if your LVR (loan-to-value ratio) is above 80%, meaning your deposit is under 20%. It protects the lender if the loan is not repaid, and the cost is usually added to your loan rather than paid upfront. The LMI premium varies by lender, loan size and LVR, so a broker can give you a figure for your situation. See what is LMI.

Loan-to-Value Ratio (LVR) is the percentage of the property's value that you borrow. For example, borrowing $800,000 for a $1,000,000 home means an LVR of 80%. Lenders use LVR to assess risk: a lower LVR typically unlocks more options and helps you avoid LMI (lenders mortgage insurance).. The home loan comparison tool works out your LVR from the property value and loan amount you enter.

An offset account is a transaction account linked to your home loan. Any money in this account reduces (or "offsets") the loan balance you're charged interest on. For example, if you have a $500,000 loan and $50,000 in your offset account, you only pay interest on $450,000. The money in your offset account stays accessible day to day, so you can draw on it if needed. Compare with redraw; our offset savings calculator estimates the effect. See offset vs redraw.

Pre-approval, sometimes called conditional approval, is a lender's indication of how much it may lend you, subject to conditions, before you have found a property. It is not a full, unconditional approval and does not guarantee the final loan. It differs from the home loan comparison tool, which gives indicative estimates with no credit check. See what is pre-approval.

A principal-and-interest loan splits each repayment between the amount you borrowed (the principal) and the interest charged on it, so the loan balance reduces over time. It is the most common repayment type for owner occupiers. Our loan repayments calculator estimates the monthly amount.

Redraw lets you pull back extra loan repayments you have already made above your minimum. It can reduce the interest you pay while keeping the money available, though it is often a little less flexible than an offset account. See offset vs redraw.

Refinancing means replacing your current home loan with a new one, often to get a different rate, change features, or access equity. If considering refinancing, it is important to weigh any switching costs against the benefit. The home loan comparison tool works for refinancing as well as new purchases. See can Xandii help me refinance.

Serviceability is a lender's test of whether you can afford the loan repayments. The lender takes your income, subtracts your living expenses and existing debts, and checks the loan is still affordable after applying its assessment rate. Because each lender uses its own rules, the same situation can produce very different limits, which is why the home loan comparison tool ranks lenders by indicative capacity. See how lenders decide what you can borrow.

Settlement is the final step where ownership of the property legally transfers to you, the lender advances the loan, and the balance of the purchase price is paid to the seller. It usually happens several weeks after contracts are exchanged.

Stamp duty is the state or territory government tax on a property purchase. The amount depends on where you buy and the property price, and concessions where available (especially for first home buyers). Our stamp duty and purchase costs calculator estimates it, and a broker can point you to the current concessions. See do first home buyers pay stamp duty.

A variable rate can move up or down over time as the lender adjusts it, so your repayment can change. It usually comes with more flexibility than a fixed rate, including features like offset and redraw. Xandii's indicative figures are based on variable rates. See fixed vs variable.