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Mortgage & Finance Glossary
Plain-English definitions of common Australian home loan, mortgage broking and asset finance terms.
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What This Glossary Covers
This glossary explains common lending terms such as LMI, LVR, offset accounts, redraw, comparison rates, serviceability, equity, split loans and asset finance structures in plain English. It is general information only and should be checked against your lender documents and personal circumstances before making loan decisions.
Reviewed by Callum Duffy, Finance Broker and MFAA member. Last reviewed: 20 June 2026.
Definitions
Common Mortgage and Finance Terms
Use these definitions as a starting point when comparing lender options, reading loan documents or preparing questions for an initial assessment.
- LMI
- Lenders Mortgage Insurance is insurance that protects the lender if a borrower defaults. It commonly applies when the loan-to-value ratio is above 80%, unless an exemption, guarantor structure or eligible government scheme applies.
- LVR
- Loan-to-value ratio is the loan amount divided by the property value, expressed as a percentage. A $640,000 loan against an $800,000 property is an 80% LVR.
- Offset account
- An offset account is a transaction account linked to a home loan. The balance is offset against the loan balance before interest is calculated, while the money remains accessible.
- Redraw
- Redraw lets you access eligible extra repayments already made into a loan. Access can depend on lender rules, loan type, fees and available redraw balance.
- Comparison rate
- A comparison rate combines the interest rate with certain fees and charges into one annual percentage figure, helping borrowers compare the indicative cost of loan products.
- Pre-approval
- Pre-approval is an indicative lender assessment before a specific property is fully assessed. It can help guide your search, but it is not a final approval or loan guarantee.
- Formal approval
- Formal approval is the lender credit decision after the property, valuation, documents and application details have been assessed and accepted.
- Serviceability
- Serviceability is a lender assessment of whether you can afford a loan after income, expenses, existing debts, dependants and assessment-rate buffers are considered.
- Guarantor
- A guarantor is a person, often a close family member, who provides additional security or support for a loan. Guarantor structures involve significant legal and financial risk.
- Split loan
- A split loan divides borrowing into more than one portion, commonly part fixed and part variable, so a borrower can balance repayment certainty with flexible features.
- Chattel mortgage
- A chattel mortgage is a business asset finance structure where the borrower owns the asset from the start and the lender takes a charge over it as security.
- Finance lease
- A finance lease is an asset finance structure where the lender owns the asset during the lease term and the borrower makes payments to use it.
- Equity
- Equity is the difference between a property value and the debt secured against it. Usable equity depends on lender policy, valuation and serviceability.
- Cross-collateralisation
- Cross-collateralisation means more than one property is used as security for one or more loans with the same lender. It can reduce flexibility when selling, refinancing or restructuring.
- Interest-only repayments
- Interest-only repayments cover interest for a set period but do not reduce the loan balance during that period. They can lower short-term repayments but usually increase total interest over time.