Mortgage brokers glossary

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

What is a comparison rate?: A comparison rate is a standardised percentage figure that combines a loan's interest rate with applicable fees and charges, required by law in Australia to allow borrowers to compare different loan products on an equal basis.
What is a credit score?: A credit score is a three-digit number (typically 0-1000 in Australia) that reflects your credit history and repayment behaviour, calculated by credit reporting agencies and used by lenders to evaluate borrowing risk.
What is a guarantor loan?: A guarantor loan is a home loan where a third party (usually a family member) guarantees the debt by pledging their property equity or income as security, reducing the lender's risk if the borrower cannot repay.
What is a lender panel?: A lender panel is the group of banks, building societies, and non-bank lenders that a mortgage broker is formally authorised to arrange loans through.
What is a low-doc loan?: A low-doc loan is a mortgage product that accepts reduced or alternative income documentation instead of full payslips and tax returns, commonly used by self-employed borrowers.
What is a mortgage aggregator?: A mortgage aggregator is a business service provider that grants mortgage brokers access to multiple lenders, compliance frameworks, and professional accreditation.
What is a redraw facility?: A redraw facility allows a borrower to withdraw funds from extra repayments made against their loan balance, giving them access to money they have already paid down rather than having to apply for new credit.
What is a serviceability assessment?: A serviceability assessment is the process a lender uses to determine whether you can afford to repay a home loan, calculated by comparing your income against your expenses and existing debt obligations.
What is a split loan?: A split loan is a single mortgage facility where the balance is divided between a fixed-rate portion and a variable-rate portion, allowing borrowers to hedge against interest rate changes.
What is a stamp duty concession?: A stamp duty concession is a reduction or exemption on transfer duty payable by first home buyers in Queensland when purchasing property, usually limited to transactions below a specified property value threshold.
What is an assessment rate (buffer rate)?: An assessment rate is a higher interest rate buffer (typically 3% above the actual loan rate) that Australian lenders apply when calculating whether borrowers can sustain repayments, as required by APRA regulations.
What is an offset account?: An offset account is a savings account linked to your home loan where your deposit balance reduces the amount of interest charged on the loan each day.
What is best interests duty?: Best interests duty is a legal requirement that mortgage brokers must act in their client's interests when recommending loans, prioritizing the client's needs and circumstances over the broker's own financial gain.
What is debt service coverage ratio (DSCR)?: The debt service coverage ratio is a measure of how many times a property or business's annual income can cover its total annual debt obligations, including principal and interest payments.
What is fixed rate vs variable rate?: Fixed rate mortgages charge a single interest rate locked for a set period, while variable rate mortgages fluctuate with market conditions. A split loan combines both structures in one home loan.
What is genuine savings?: Genuine savings are funds a borrower has accumulated and held in their own account over a period of time, rather than receiving as a gift or inheritance, to demonstrate financial capacity and discipline to a lender.
What is lenders mortgage insurance (LMI)?: Lenders mortgage insurance is a one-off insurance premium paid by the borrower to protect the lender against default when the loan amount exceeds 80% of the property value.
What is loan-to-value ratio (LVR)?: Loan-to-value ratio (LVR) is the loan amount expressed as a percentage of the property's market value, used by lenders to assess lending risk.
What is mortgage broker commission (trail vs upfront)?: Mortgage broker commission is the fee a lender pays a broker for arranging a loan, structured either as an upfront payment at settlement or as ongoing trail commissions over the loan's life.
What is pre-approval?: Pre-approval is a conditional commitment from a lender stating how much you can borrow, based on preliminary checks of your income, credit, and assets, valid for a set period and subject to final verification.
What is principal and interest versus interest-only repayment?: Principal and interest is a loan repayment structure where borrowers pay down the loan balance plus accrued interest each period, while interest-only involves paying only interest with no reduction to the principal until a specified date.
What is settlement in a mortgage transaction?: Settlement is the closing stage of a property purchase where the lender's funds are transferred to the seller, all legal documents are executed, and ownership of the property passes to the buyer.
What is the First Home Guarantee scheme?: A federal government scheme that allows eligible first-time homebuyers to purchase property with a minimum 5% deposit and avoid lenders mortgage insurance, provided they meet income and property price caps.
What is unconditional approval?: Unconditional approval is a lender's formal commitment to fund a mortgage once all conditions have been verified and satisfied, representing the final stage before settlement.